Because we make GUARANTEED instant equity for our clients, some people think that what we do is too good to be true. Others swing to the other end of the scale and question why we charge a fee to do what we do, and for some reason think we should be making them a profit, for free.

Let me cover off both these extremes because as with everything, the truth is never in the extremes.

Firstly lets deal with the “too good to be true” question.

I can understand why you might think that before you have all the facts. This thinking usually comes from one of 3 quite simple misunderstandings. Unfortunately, sometimes, when people haven’t experienced something before, they have an automatic kneejerk reaction to doubt it. To overcome that I want to explain those 3 misunderstandings and then you’ll understand why what we do clearly isn’t too good to be true, but it is in fact a lot of hard work.

Misunderstanding #1:  how real estate is marketed or more importantly how it gets sold.
Misunderstanding #2: the work involved in what we do.
Misunderstanding #3: how we make money.

Usually when you understand these three things, it all makes perfect sense.

Misunderstanding #1: how real estate is marketed.

If you have only ever looked for investments in the typical locations like realestate.com.au, domain.com.au, the weekend paper or through a local real estate agent, you will have never seen instantly profitable property deals before. And that’s not surprising because those marketing options are usually the last place developers go to sell their properties.

What do you think is the fastest and easiest way for a developer to sell a property?

You probably won’t be shocked to learn that it is to pick up the phone and call a mate. It doesn’t get much easier than that does it.

If the mate doesn’t want it and rejects the deal, they then call that handful of investor friends they have and see if they can get it sold. 4-5 phone calls to highly qualifies buyers.

If that doesn’t work, what then? If it’s been rejected by their inner circle of mates, the next thing they do is call the list of investors they have in their phone. There are investors who have all started a relationship with the developer and said “hey, next deal you have with instant equity in it, call me”. So obviously, the next best way to sell a deal is to start working their way down that list.

Now obviously, they don’t work their way down that list it alphabetically. That’s not how it works. They call the ones they know are most likely to buy first. So these people know that at Caifu property, we have a list of ready to buy investors, so one call to us gets them access to a large number of individual investors. That’s pretty easy right.

After they try all those options, and all those educated investors have looked it over and rejected it, that’s when they call a local agent to sell the property.

Do you think that agents immediately list it directly onto domain and real estate.com?

Obviously not, they then call their mates and the investors who have been hassling them for profitable deals too. So this process starts all over again and yet another group of well connected investors get a look at this property before it ever hits the open market.

If none of these investors are interested in the property, it’s only then, that the advertising to the general public begins.

So can you see why these instantly profitable deals never make it to the real estate websites? Any deal that’s actually any good gets snapped up well before then in what is referred to as an off market deal.

You can also know that any deal that you are seeing advertised in the usual locations, has already been passed over by a whole host of other investors. Ultimately, you’re getting the reject deals that others don’t want.

That is one of the big advantages of working with us, you get to be further up the food chain, perhaps for the first time in your life and that is probably why you have never seen these kind of profitable deals before.

They simply don’t make it to the open market and if you’re not connected, you never will see them.

Misunderstanding #2: the work involved in making these deals happen.

The reason this seems too good to be true, is because to you, it seems so easy. That’s not actually your fault because the reason this seems so easy is because we do everything we can to make it seem so easy.

What you’re not seeing is that every time we put 2-3 properties in front of you, you don’t have to churn through the 200-300 properties that we had to analyze and reject, to only keep the profitable ones.

Think about the process involved. Let’s pretend you actually find some land in the right kind of estate that you are allowed to build an investment property on. I covered this in a different video but those blocks are extremely rare and because of that they are very frequently sold via the process we just discussed, so you aren’t seeing them on domain or realestate.com, so as you can imagine, driving to several of these estates to get one of these blocks takes time.

So lets assume they give you a block, they would obviously prefer to give access to groups of investors like here at Caifu, who will take all the investor block in one go, but lets pretend that you can get one.

After that, you need to figure out the highest and best use for that land in that area. Do you build a house or a duplex? How many bedrooms and bathrooms? How many garages do people want in that area? Is a media room more desirable than an additional bedroom? You have to figure this all out. That’s a lot of hours and you also need access to historical sales data to figure it out.

Once you know that, you’re still only beginning. Next you need to get a quote for the building. The builders need to look at your land, figure out the best building for that land and then pull together a quote. How many builders will you get quotes from? How long will it take to get your quotes back? Because remember, investor blocks move fast so you will only get a short window of opportunity to lock the block away. And of course, if you don’t, do you think you can get one in the next stage, of course not because they’ll think you’re a time waster, you will only get one shot at this.

Lets assume you get your quotes back in time, how do you choose the best one? For one of my properties, for the exact same design, the difference between the highest quote and the lowest quote was $100,000. I couldn’t believe it and to figure it out I had to go through every single item on each quote to work out which one was the best value. The cheapest isn’t the best option necessarily because they might be lower quality and you end up creating an undesirable property. So as you can imagine, that’s a lot of work and if you are not familiar with the quality of certain finishes and appliances then you can get this really really wrong.

Bet’s lets assume you get through all that and you haven’t made any mistakes. Now you have your land price, and you have your build price, so you have your total development cost figured out. Is the deal profitable? To figure that out you are back to your historical sales data to figure out the true market value for the property you intend to build.

Now, after all that work, it’s only now that you can decide if this is a good deal or not. Based on our experience, it’s less than 5% of deals that pass the grade at this stage. For our standards for what we will show clients, because we want higher profits for our clients, it’s about 1-2% of deals that eventually make the grade.

I guess that’s the question, you are going to have to repeat this process a minimum of 10 times before you find a profitable deal, but it will be probably more likes 20-40 times before you get a really good one. Are you prepared to do that work? How many different estates are you will to drive to, to get that many opportunities? How many builders will be happy to give you a quote for your 3rd or 4th block before they decide you’re a tyre kicker?

And this is all happening before you then have to manage the build. Yes the builders have management teams but only an inexperienced investor leaves that whole process up to chance. Regular site visits are essential to keep the project on track and on time and it requires a trained eye to detect when a build is headed off course.

The person who thinks this is easy and as a result they think it’s too good to be true, they misunderstand just how much work is involved and making these deals happen.

Misunderstanding #3: Why would we do all this work for clients?

It’s our business to do this work for clients and we charge a fee to do it.

We get paid in two ways.

Firstly, we charge a fee to our clients to do all this work for them. That’s why we charge a fee, all that work I just described, it takes people and obviously those people need to be paid. And I can absolutely guarantee you that your membership fee is nowhere near enough to cover the costs involved in finding these deals.

So that obviously raises the second way we make money and why this isn’t too good to be true. We also get paid a project management fee to make this all happen. Ultimately, the way we work, we save the builders management costs and work. For starters, they don’t need to hire someone to talk to you and manage your build. Knowing they are dealing with professionals, they know they have less costs to cover and they factor that in as a management fee.

You can’t go directly to a builder and negotiate this fee out of your build quote either. It’s not an additional cost, it’s an integral part of managing the build process because one way or another a human needs to be employed to do it. They either pay a company like mine to do it or they do it internally, but either way, it’s an unavoidable cost involved in the construction process.

Lastly, as you can imagine, all this work has costs. The networking to get deals, do you have any idea how many estates you need to drive to and relationships you need to form to get access to just a handful of deals? It’s amazing.

Then there’s the research, we spend a lot of money just to get the data, and then obviously it’s a very specialized skill to then know how to use it to create the right deals. As you know, specialized skills are expensive too. Then there is understanding the quoting process and going into the quotes in detail, again, another specialized skillset. Contract negotiation, lawyers don’t come cheap obviously.

This is just a few of the people involved. Don’t forget the rent we pay, the mobile phone everyone needs, the travel to all the different estates in different states. Airfares, accommodation, meals, car hire, you name it. This all has costs.

The point I want to get across there is that to make this happen, it costs money and that is unavoidable for any and every business. It’s naïve to believe anything else. So if you come across a company who isn’t charging you a fee to do all of this work for you, where do you think the money they need to cover these costs is coming from? It’s coming from somewhere obviously, otherwise they are on their way to going out of business, so if it’s not coming from charging a fee, the only other possible place it can be coming from is within the cost of the deal. One way or another, all these costs must be covered in any business. We just like to be honest about it and charge a small joining fee to work with us rather than hide it in the cost of the deal and then hope the client isn’t astute enough to figure it out.

I am going to give you the respect of assuming that you are astute enough to figure it out and I’ll not insult your intelligence by hiding it from you. We just don’t play those kind of games. You’ll never find anyone who feels pickpocketed by me because I was hiding money in a deal.

I’m really looking forward to talking with you soon and getting started on creating some instant equity for your property portfolio and starting to really drive that forward for you.

If you have any questions please call 1300 881 422