Binvested bulk deals explained
If you step on a nail it goes right through your foot; but if you step on 1000 nails at once, they support you. This is an example of strength in numbers. Another example is the awesome bargaining power you can bring to the property investing table when you come together with a stack of other buyers.
At Binvested, we have been able to achieve significant value, even in some of Australia’s most difficult, booming property markets, by buying in bulk.
A few years back, when some real estate markets began to plateau, we saw an opportunity to buy properties in bulk from developers. We found they would sell for a better price for the convenience of offloading multiple units at once, rather than waiting for individual buyers.
Since then, we have bought in bulk from banks, administrators, councils, government bodies and even people in large families. We do this by researching and sourcing a deal, then approaching our investor clients to see if they would like to buy in and make instant money.
We recently bought a block in Botany, Sydney. It had six units, which we were able to pick up for $390,000 to $410,000. The day after settlement, we refinanced and pulled out $175,000 per property in equity, meaning the owners could go and buy more property.
Over in the Parramatta area, we did a block for $290,000 per unit. This ended up being $60-$70,000 below market value.
Another one saw brand new units selling for $500,000, but we’re getting them for $350,000 each from the developer. Straight up, these are returning $400 a week in rent.
The more affordable end of the market is very hot, but we have shown that buying in bulk will still get you a deal.
Closer to the city in Newtown, we’re purchasing 15 out of 25 units from a family looking to sell in one line. These are just 3km from the city and we are getting them for $460-$510,000 each. Ordinarily, for a price like that in Newtown, you’d have to travel back in time about 10 years. Individually today, these units would be worth $650,000 plus.
It’s not all smooth sailing. The first barrier is obviously that if you are an average investor, you’re not likely to have $5 million or $10 million ready to spend on bulk property deals. And if you did, would you even know where to start?
That’s why you need to do it through a reputable buyer’s agent with runs on the board, a contact book full of good developers and agents and years of experience in locating and researching these deals.
The next challenge is that these deals are often complex, with so many moving parts. There may be 10 or 15 people coming into a deal who all need to settle on the same day. Then they are each going through their own banks, so you must wrangle and manage the expectations of all these different lending institutions.
Then there are the lawyers. You want one good lawyer to administer it all, because the more lawyers involved, the more complicated it gets.
Finally, you need to be patient. The deals can take a long time to do and there is a lot that can change in the meantime, especially in the current environment. One person’s finance may fall through, or they lose their job, or one of their other properties goes through a vacancy period due to rental stress and their serviceability is affected.
Why do it?
One benefit is that the properties are usually in nice or wealthy areas. We’ve done one in Vaucluse, in Sydney’s east before. It is unusual for someone to own and be selling whole blocks in cheaper, fringe suburbs.
But the main benefit is obvious. There is so much value to be generated by buying so far below market. The investors we approach to take part are basically saying “yes” to free money. We have done all the leg work for them. And they can maximise the benefit by pulling out equity immediately after settlement and using it for their next purchase.