How Do We Make Money When Our Services Are Free To Clients?
This one is for the sceptics, the curious ones, and those who just can’t help themselves! Today I’m going to tell you how my company makes money even though our services (after the initial consultation) are free to clients.
As a consumer in a free market, you have two main choices in how you can purchase a property:
1. Local Real Estate Agent
The first option, which is what most people choose, is to buy off their local real estate agent. Usually it’s a property within their local suburb, or perhaps they found it off realestate.com.au in a location they think will do well.
The problem with buying from a local agent is that you’re limited to what they’ve got available, which may or may not be a good investment property. Your local real estate agent does not specialise in property investing – their criteria for listings is whether it’s within driving distance or not and if they’re going to get commission from a sale. If you asked them whether the property you’re looking at is a good investment opportunity, of course they’re going to say yes!
A local agent starts with the property, and then will happily sell it to anyone who walks in their doors.
2. Property Investment Firm
The second option is to buy through a property investment firm. I can’t speak for all property investment firms, but I can talk you through our process to help you understand how we work and how we make our money so that you can decide if that’s the kind of system you’d be comfortable with.
Firstly, the biggest difference between us and a local agent is that while they start with the property listing (which they need to sell), we start with the client (and find them a suitable property to meet their needs). Because we start with our clients first, we take our time with understanding their situation, put together a plan, and take extremely good care of them.
At this stage, we do charge a small fee ($495 unless you’re lucky enough to take advantage of a special offer) to put that plan together, but once that fee is paid, our clients have access to our services for life.
Our next step is to do detailed research to find out where in the country is suitable for investing – a location that offers low risk and is going to boom and make good money in a timeframe that works for the client’s situation. We inform our clients on the best location(s), and only then do we start to source the best properties in those areas. Once again, this is very different to a local agent who is limited to properties within a very small radius.
The way this normally works with us is we’ll find a reputable builder in that location to build an ideal property for you. This means you get a new property with structural guarantees, builder’s warranties, higher depreciation (in other words, big tax return and better cashflow), better tenants, and low maintenance.
When we approach the builder, we explain that we have clients who need investment properties, and we check that they meet our strict criteria. The builders are then happy to pay us a referral fee for bringing our clients to them. This is the main source of income for my team.
The builder is more than happy to pay this fee because their alternative options include expensive sales and marketing fees. As a builder, the standard marketing strategy is to build a display home and man it with salespeople, and then advertise so that people come and visit this display home, all of which costs a lot of money. So, our referral fee simply comes out of their marketing budget.
As a buyer, it’s important to be aware that you will pay for this referral fee, commission, or marketing cost as part of purchasing any property, whether it’s from a local agent, a private seller, or a property investing firm like us. It’s built into the cost of the property.
The difference is when you purchase a property through us, you get all the added extras like research, training, ongoing support, and access to expertise. And you know you’re getting the best possible property for your portfolio, rather than being limited to a local agent’s listings. We’ve designed our model so that you get access to all of our services without being out of pocket. Essentially, you get a service for free, and we get paid for taking good care of our clients. It’s a win-win!
So… what should you do?
Above all, it’s very important that you get professional help, no matter who you decide to go with. Is it really a very good idea, as an amateur, to invest without help? You’re playing with hundreds of thousands of dollars here… the stakes aren’t small. Take things seriously and get experts to help you on your property investing journey.
If you haven’t bought an investment property yet because you’re scared of getting ripped off, or you’re avoiding a property investment firm because you think they’re just out to make money off you… I strongly suggest that you simply do your due diligence. Ask the right questions. Find out how they make money and if they follow a client-first process with research and other extras that really benefit you (like we do).
Accept that no matter which way you go, you will be paying the same marketing fees/commission with your property, in the end, it comes down to the kind of care you want to receive as a client. If you want the extra help and an expert working for you, not just for the sale, a property investment firm would be the logical choice.
I’ve explained to you how we get paid. It’s actually pretty simple, but it makes sense and benefits everybody. As you can see, I’m very open, honest, and transparent about my business and its processes, so if you have any further questions, I’d be happy to answer them. Please feel free to drop me a line!
Or, if you’re ready to start your journey with a company like mine, please do get in touch so we can start the process rolling!
Daimien J Patterson
Daimien Patterson is the CEO of Integrity Investment Properties, a property investment company based in Australia. He regularly produces books, blogs, and videos on the topic of property investing. Head to [integrityinvestmentproperties.com.au] for your free copy of Daimien’s book, Safe as Houses.