Dont be Deceived by the Discount!

by : Keith McGregor

Everybody loves to think they are getting something cheaper than usual, that they have an “eye for a bargain “.
In property this is a fairly new concept, in the past the concept that you could negotiate as much as 25% discount on a property most likely beggared belief.

Well discounted property is out there.
Even now it is not widely apparent that developers are offering discounted property….unless you know to look past their clever marketing ploys.
Now by marketing ploys I mean making something look like something it is not, so for instance if a developer knew that some of his properties were not selling he needs to lower the price….right?
Would it surprise you if I said no?.
Other ways that developers offer discounted property without making it apparent to the average punter is by offering rental guarantees; paying legal fees, brokers fees, stamp duty etc…

These are very clever ways of maintaining the value of their property; nothing devalues a product more than a big discount being attributed to it!
Comments like, “so cheap, what’s wrong with it” normally follow. Also, the developer needs to keep old purchasers happy, if you had just bought a 2 bed apartment for ?200,000 and then find out that the developer is offering a 20% discount on a similar unit you are not going to be too happy! This is also the case on overseas discounted property.
A villa in Portugal with a 2 year rental guarantee at 10% yield sounds great. In actual terms the developer is simply using some of the profit that is in the build to finance this, if you wanted a 20% discount instead then in many cases you could have.
In reality it normally comes down to the investor or the investment company to ascertain the level of discount available. Is a rental guarantee better than a straight discount, do you want your mortgage brokers fees paid?

If a valuation is available then you have a figure to start from, you know that if they offer a 2 year rental guarantee of 5% per annum and a 15% discount then they have 25% to play with.
Be aware that sometimes the developer will offer a cash lump sum as rental guarantee, so not a monthly figure.
In reality many fees can be put on top of your mortgage, take a good look at what is available and play with the figures to find out what you are happy paying and what you want as part of your discounted property purchase.
Don’t be fooled by the developers marketing guru’s, they have a bottom line for discounted property they sell and it is up to you to find out how to get to that.