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Builders Slash Profit Margins

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Contributor:
Brian Dalley
Brian Dalley

Builders Slash Profit Margins to help kick start the real estate industry, YEAH RIGHT!

It was only last week that I was giving Bernard Hickey the stick for rolling his eyes at the resurge of interest shown by some property investors. After reading the Herald on Sunday and receiving several email messages on Monday, I can now to a certain degree understand why he made the comment “here we go again”. But really are people that naive, is their memory that short term.

It was only yesterday that we were in a recession and today it’s all over. I don’t think so.

Sure the [R Word] has two meanings [R for Recession] and [R for Recovery] nothing new there as there will always be winners and losers so it is expected there will be conflicting views depending on what barrow you are pushing.

This week I would like to turn the spotlight on the recent resurgence of property investment promotions.

Sure there are some great opportunities out there and I am still a strong advocate for investing in residential property but recently have been appalled at what can only be described as misleading advertising in my opinion – or is it, you tell me.

It appears that overnight and on a flat market some builders have been able to increase their profit margins and then through what appears to be generosity beyond belief, are prepared to give away thousands of dollars.

Some would call that statement very pessimistic but when looking at the facts I feel it is a very realistic observation and as investing is a business, facts not emotions should be the basis of any decision.

A full page add read, Buy Direct from Builder/Developer $395.000 “You make the profit!!” FREE Financial Assessment. [A Rental Guarantee Programme Available] There is apparently $25,000 profit in this one from day one.

If you think that is good check this out, HUGE discount pre-construction purchasers. Valuation as of 24th April 2009 $575,000 less discount $85,000 = purchase price $490,000. $85,000 up for grabs here.

The first example I question the authenticity for the following reasons:  there is a shortage of property in the Auckland region in that price bracket which has resulted in properties attracting multiple offers / everything is handled in-house.

The second example [this one should be investigated] so it is my intention to copy this Blog and the ad to the Commerce Commission.  For this reason I feel it would be inappropriate to comment on this particular package until I have heard back from the Commerce Commission.

Please don’t put your cheque books away as there are some great opportunities out there. All I am saying is proceed with caution and don’t be afraid to question. In fact I find myself making this statement daily;

“There really hasn’t been a better time to invest in residential property but you must invest in something that works for you.”

Brian Dalley is a leading Property Consultant | formerly an NZMBA Mortgage Broker, and Real Estate Agent.  You can read more of his views and opinions on his website www.propertyprofit.co.nz.

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