How to Identify Discount Opportunities and Negotiate Better

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• Portfolio Manager for 400 clients

• 9 years investing experience

• Recently acquired two off-the-plan properties

• Current real estate license

Danielle Tasses

• Portfolio Manager with over 500 clients

• Bachelor degree in Real Estate & Property Development

• Member of the Urban Development Institute of Australia

• Almost a qualified real estate agent

Tehana Payne

We help investors build and manage

their property portfolios

• 3,000 current subscribers

• Mix of personal users, brokers, buyers agents and accountants

• 200,000+ members use us for market information, calculators, investment news and updates

Real Estate Investar

ASX:REV

• Heavy investment in product

• Public company governance

• Strong and focused board;• Simon Baker – Former CEO of REA• Anthony Catalano – CEO of Domain

In partnership with…

1.9m Australians

1 Property

2-4 Properties5+ Properties

• Pays shortfall for 5 years+.

• Eventually sells and pays down personal debt.

• No retirement income.

• Strategy & numbers.

• Self funding portfolio.

• $100-$250k+ passive income in retirement.

• Has high income or buys every few years.

• Freehold in retirement.

• Min. retirement income.

Source ATO/ABS

3 levels of Property Investment

1.9m Australians

1 Property1.4m73%

2-4 Properties470,000

25%

5+ Properties30,000

2%

• Pays shortfall for 5 years+.

• Eventually sells and pays down personal debt.

• No retirement income.

• Strategy & numbers.

• Self funding portfolio.

• End up freehold• $100-$250k+

passive income in retirement.

• Has high income or buys every few years.

• Freehold in retirement.

• Min. retirement income.

Source ATO/ABS

What level are you aiming for?

Why Purchase a Discount Property?

• Lack of funds to purchase full price property in an area;

• Entering a market below median (opportunities to

manufacture growth);

• Renovation, restoration or development strategies;

• Increasing cash flow at reduced price;

• To save money, short and long-term (interest paid,

upfront

How to Identify a Discount Property

• Is it below median price for that area?

• Has it been on the market for an

extended period of time?

• Has the vendor reduced the price since

first advertising?

• Distressed selling conditions?

• Damage to the property (discount

outweighing cost of repair)

• Finish of the property

• Land size

Things to be cautious of…

• Is there a reason why the property is

below median? • Housing commission

• Surrounding infrastructure detracts

from support

• Location

• Dishevelled property (damage

outweighs cost)

• Flood zone

Real Estate Investar’s tools

Investar Search

Searching discount opportunities

3 Easy to use filters to source discount opportunities based on your preference

Search results

My Valuer/My Research

Estimate value

Estimate value continued.

Sale history

• On the market for 3 months• Price reduction of $20,000

Sale history

What’s happening in the area?

Know the agent

• Agents that negotiate are your friends, get to know them (whether it be through P2P or research);

• Track agents/agencies that have a record of discounting;• Understand what the current Vendor’s agent.

Approximating rental return

You’ve found the property, what now?

Property Analyser

Before negotiating

• Gross yield 6.02%• LVR below 80%• Buying power over 200K

Before negotiating cont.

• After tax cash flow of $114

After negotiating cont.

• Gross yield 6.26%• LVR below 80%• Buying power over 200K

After negotiating cont.

• After tax cash flow of $122

ResultsBefore Negotiation:6.02% Gross yield $114 after tax cash flowInterest payments $13,794

After Negotiation:6.26% Gross yield$122 after tax cash flow Interest payments $13,269

• Think about the long-term picture;

• Difference in interest is $505 per year, more money in the banks pocket - $5050 saved over 10 years.

Negotiation

Steps to Negotiation

1. Understand the method of sale

2. Prepare to negotiate

3. Assess the sellers situation

4. What to do at the negotiating stage

5. Prepare to close the deal

6. What to do if the deal falls apart

7. How to negotiate counter offers

1. Understand the method of sale• Purchasing property can be competitive;

• It can be an emotional process;

• Vendors can be more flexible with

pricing if the property was passed in;

• Private sale ‘competition’ can

sometimes just be you up against

yourself.

• Auction clearance rates are a good

indicator as to the competitiveness of

the market;

2. Prepare to negotiateDo your homework/research; • Seek assistance from a property valuer (location, condition,

accommodation, style and land size);

• Acquire 3rd party assistance with negotiation (buyers agent,

solicitor, family/friend);

• Sales comparisons of similar properties sold over the last 3, 6

and 12 months

• Organise a pre-purchase building

report (structural and

maintenance issues may provide

leverage).

3. Assess the sellers situation• Locate distressed vendors;

• Death, divorce, debt, disaster etc.;

• Use contact information found through PriceFinder to contact

vendors.

Ask questions:

• Why are they selling?

• Have they purchased another property?

• Which settlement terms are preferred?

• Have they had any offers?

• How long has it been on the market?

4. What to do at the negotiating table

• Be prepared;

• Aim 10% below the estimated market value of the property;

• Always start lower so you have room to negotiate;

• Don’t play your final or ‘best offer’ at the beginning;

• Stagger out the negotiation;

• 5-10% difference can provide instant equity- purchasing

sooner.

5. Prepare to close the deal

• Have an upper price limit;

• Use the terms of your offer to

negotiate: price, settlement

terms, deposit, conditions;

• Make offers as unconditional

as possible (creates win-win);

5. Prepare to close the deal cont.

Increase chances of closing the deal:

1. Organise finance, building reports and contract

approvals first;

2. Have a back up property to use as leverage;

3. Find out if there are other offers and the terms;

4. Present lower comparable sales to the vendor;

5. Present offers in writing with a 10% deposit

cheque.

6. What to do if the deal falls apart

• Sometimes waiting is the best strategy (time);

• Time can be best depending on the type of property;

• Tell the agent to get back to you before selling;

• Find out what the ideal settlement is;

• Make your offer unconditional (not subject to finance,

building reports);

• Always end your offer in uneven numbers to demonstrate

‘pushing your limit’.

7. How to negotiate counter offers• Find out how many offers have been made;

• Ask the agent how many contract requests/building reports

they’ve had;

• Sweeten counter offers;

• Try to make the first offer on the property;

• Most importantly, understand the importance of walking away.

• We’ve searched 900k to 1.2m properties.

• We’ve narrowed our search based on our specific criteria.

• We’ve valued and researched the property to understand it’s market value.

So what have we achieved thus far?

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• Loved what I saw, but I am time poor?

• I want to do these deals, but I am not confident doing it alone?

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