WHICH RISK IS BETTER

Hi Ireena,

Thanks for your post and welcome to the PropertyInvesting.com community.

In respect to general things to look our for, I’d strongly recommend you read my 10 Laws of property investing success that have been outlined in editions of Insider to date (the monthly newsletter).

Specifically though, you raise a good topic of converstaion about the concept of delayed equity.

These units that you mention you could buy for $460k today and might be worth as much as $700k when they are completed in 2005. Plus, being in Vic. you will also save on stamp duty.

I have no experience in buying this kind of property but I have the following concerns:

1. If you make a mistake, then given the numbers involved, it is likely to be as expensive one. If you want to invest in property I’d encourage you to start with smaller deals and then work your way up.

2. I have friends you purchased a property on St. Kilda road several years ago under the same kind of promise and recently took possession. The property is only just worth what they paid, and if they sold, less than what they paid when you factor in sale costs.

3. I believe that the type of tenant you’ll attract will be a transitory tenant, rather than the more stable family tenant. This adds to the risk in the investment.

4. Interest rates are more likely to go up than down in the medium term, which means that buy the time you settle your likely repayments will be higher than they would be now. Be sure that any financial data you inspect allows for this.

5. About your friend… I don’t want to jump the gun here, but is your friend paid a commission when you buy? ie. is he a sales agent? Hmmmm. Something doesn’t seem quite right about what you have written and smells a bit fishy.

6. Ask for some kind of comparatives with other projects in the area to see if the projections on other deals worked out as planned. There is a huge difference between a budget and reality.

Ok… it’s clear that you need some sort of plan before you do anything []

Work out what it is that you want (and try not to be greedy). Seriously, for $25 a good place to start is the Fast Track tape (available from the resources area). Even if you don’t want +ve cashflow it talks about how to find an area that would be a good place to invest.

I’m concerned by the numbers you are talking about… there seems to be too much risk for someone beginning.

Regards,

Steve McKnight

P.S. Congratulations on the new addition to the family.

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Remember that success comes from doing things differently.
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Hi again,

I doubt that your friend is / will rip you off… but it’s likely to be a good way to start his project to have you sign on (from his perspective) since he will need some pre-sales for both his marketing and also to get financing for the project.

Tread carefully and don’t let friendship or greed (or hype) get in the way of cold are facts… and read the old editions of the newsletter before you do anything!

Bye

Steve McKnight

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Remember that success comes from doing things differently.
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