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17-10-13, 21:59
http://propertysoul.com/2013/10/17/top-five-gimmicks-of-new-launch-part-ii/
Top five gimmicks of new launch (part II)
October 17, 2013
Besides gathering a crowd there and creating the urgency to buy, there are other marketing gimmicks you may find familiar at a new launch.
Gimmick 3: Make some noise
To draw the attention of potential buyers, media coverage is a better alternative than advertising. It sounds more convincing and also helps to save the budget to buy airtime.
The public relations department of property developers know when to feed the right stories to the journalists. A media report or a rumor that a celebrity, an investor or a government official just bought one unit at the sales gallery.
People all want to be seen having the same foresight as the experts in property investment or the big names in their own fields. Thus the release of these stories works to motivate other buyers to follow suit.
In order to wow the readers, the media has a tendency to pick up only unusual cases. An amateur investor may have just bought a place at a ridiculously high price. Or one particular buyer has decided to buy a flat with unique design, facing or location regardless of the asking price.
An inevitable conclusion is that prices in the property market have just set new highs. The obvious connotation for potential buyers is to take action now before prices jump again.
Gimmick 4: Dangle the carrot
Goodies given away at the sales gallery is a catalyst to close deals. Be it fee absorption, furniture vouchers, furnishing packages, or branded appliances, they are attractive concessions in the eyes of potential buyers. Never mind the fact that such offers are just peanuts compared with the price of the property.
Tempted buyers are often unaware that the value of these goodies can easily be offset by a slight drop in the property’s market value. It is therefore more practical to get an immediate discount off the list price. Ask the sales representative the estimated cost of that branded appliance or furnishing package, then request for a direct deduction from the unit’s asking price in lieu of the developer’s goodie.
Some properties are sold with ‘guaranteed rental return’. It is a scheme that promises owners a fixed percentage of the property’s price as rental income, regardless of the actual rental income, or whether the property is rented out in the first few years.
This tactic is usually deployed to move units in high-end condominiums. The rental income can be seen as a form of discount off the list price.
‘Guaranteed rental return’ is different from earning rental income from actual tenants over the years. Since the amount given has actually been factored into the price, one can also argue that buyers are actually paying for their guaranteed rental amount in advance.
Strictly speaking, the party who benefits most from giving away the carrot is probably the developer itself. It is because these goodies are usually offered when the market starts to cool down so that developers are able to move properties off the shelves without lowering the price.
Gimmick 5: Promise good return
Once the sales representatives know that you are buying the property for investment, they may claim that their units can be rented out at a certain market rate.
There are two ways to check the validity:
1. Do your own research.
Go to the Urban Redevelopment Authority website to check the latest published figures on ‘Rentals of Private Residential Properties’. Find a similar unit in a nearby project that is relatively new. Check the range of monthly rent to see whether the numbers given are too optimistic.
2. Do some mystery shopping.
Respond to the rental listings of new projects in the same district to check the popularity of properties for rent there.
The sales representative may claim that their units offer an attractive rental return of a certain percentage. It is not difficult to calculate the net monthly ROI (Return on Investment) on your own.
ROI = (monthly rental – loan repayment – maintenance fee – property tax) x 12 ÷ initial investment
Once I stepped into a sales gallery where the salesperson spoke confidently that their units offered a minimum of five percent rental return. But after I did my sums, the cash-on-cash return was actually less than one percent.
Next time before you walk into a sales gallery, remember to do your homework first. When it comes to property investment, ignorance can be very expensive.
Top five gimmicks of new launch (part II)
October 17, 2013
Besides gathering a crowd there and creating the urgency to buy, there are other marketing gimmicks you may find familiar at a new launch.
Gimmick 3: Make some noise
To draw the attention of potential buyers, media coverage is a better alternative than advertising. It sounds more convincing and also helps to save the budget to buy airtime.
The public relations department of property developers know when to feed the right stories to the journalists. A media report or a rumor that a celebrity, an investor or a government official just bought one unit at the sales gallery.
People all want to be seen having the same foresight as the experts in property investment or the big names in their own fields. Thus the release of these stories works to motivate other buyers to follow suit.
In order to wow the readers, the media has a tendency to pick up only unusual cases. An amateur investor may have just bought a place at a ridiculously high price. Or one particular buyer has decided to buy a flat with unique design, facing or location regardless of the asking price.
An inevitable conclusion is that prices in the property market have just set new highs. The obvious connotation for potential buyers is to take action now before prices jump again.
Gimmick 4: Dangle the carrot
Goodies given away at the sales gallery is a catalyst to close deals. Be it fee absorption, furniture vouchers, furnishing packages, or branded appliances, they are attractive concessions in the eyes of potential buyers. Never mind the fact that such offers are just peanuts compared with the price of the property.
Tempted buyers are often unaware that the value of these goodies can easily be offset by a slight drop in the property’s market value. It is therefore more practical to get an immediate discount off the list price. Ask the sales representative the estimated cost of that branded appliance or furnishing package, then request for a direct deduction from the unit’s asking price in lieu of the developer’s goodie.
Some properties are sold with ‘guaranteed rental return’. It is a scheme that promises owners a fixed percentage of the property’s price as rental income, regardless of the actual rental income, or whether the property is rented out in the first few years.
This tactic is usually deployed to move units in high-end condominiums. The rental income can be seen as a form of discount off the list price.
‘Guaranteed rental return’ is different from earning rental income from actual tenants over the years. Since the amount given has actually been factored into the price, one can also argue that buyers are actually paying for their guaranteed rental amount in advance.
Strictly speaking, the party who benefits most from giving away the carrot is probably the developer itself. It is because these goodies are usually offered when the market starts to cool down so that developers are able to move properties off the shelves without lowering the price.
Gimmick 5: Promise good return
Once the sales representatives know that you are buying the property for investment, they may claim that their units can be rented out at a certain market rate.
There are two ways to check the validity:
1. Do your own research.
Go to the Urban Redevelopment Authority website to check the latest published figures on ‘Rentals of Private Residential Properties’. Find a similar unit in a nearby project that is relatively new. Check the range of monthly rent to see whether the numbers given are too optimistic.
2. Do some mystery shopping.
Respond to the rental listings of new projects in the same district to check the popularity of properties for rent there.
The sales representative may claim that their units offer an attractive rental return of a certain percentage. It is not difficult to calculate the net monthly ROI (Return on Investment) on your own.
ROI = (monthly rental – loan repayment – maintenance fee – property tax) x 12 ÷ initial investment
Once I stepped into a sales gallery where the salesperson spoke confidently that their units offered a minimum of five percent rental return. But after I did my sums, the cash-on-cash return was actually less than one percent.
Next time before you walk into a sales gallery, remember to do your homework first. When it comes to property investment, ignorance can be very expensive.