hi guys i was just wondering you opinion of a possible investment im looking into.
im looking at buying a block of land in a new estate, the blocks currently go for around 150,000, they have gone up twice since easter , starting at 130,000. it is a new growth area, there is a $1000 fee to secure the property , then a 10% deposit needs to be paid within a month, however settlement is not unsil december at the earliest, when your are then able to negotiate a suitable settlement date (possibly longer again)
im thinking of getting a deposit bond to secure the 10%, then flipping the property off before settlement, capital growth looks great for this area……
how does this sounds to you guys?
(this is my first rei deal by the way)and feedback appreciated
Thats a bit high risk for your first deal.
What happens if you can’t sell? Will you have the money and finance to settle? You could end up making payments on land with no income?
Could get messy, this is the kind of deal is realestate speculation, not investment.
Your first REI deal should be a cheap positive cash flow house or unit. Probably something in a regional town centre.
I would tend to agree with Slum Lord – it sounds rather risky for a first deal. Also I don’t see how it is a positive cash flow incom.[
]
I would tend to agree with Slum Lord – it sounds rather risky for a first deal. Also I don’t see how it is a positive cash flow incom.[]its cashflow positive because of the capital gain in 6 months…..upon the sale
i understand that it is risky , but this area is booming and it is doubtfull that the land wouldnt sell down the track….
Not that I agree with this deal but what is the real down side ?
Is it really $150K or more likely the land flounders and you have to sell it for $125K and take a hit.
I guess my point is what is the real loss. It is possibly not the whole amount rather the potential resale point.To lose the Whole $150K would be very extreme….not impossible but extreme.
Enjoy
AD [:0)]
(Andrew)“”Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world.”
Albert Einsteini find it very hard to beleive tht the whole 150 could be lost. if anything sell for what you paid, this is land in a booming area of the gold coast, we are atlking a $20g increase less than 2 months.
what about the possiblity of throwing a quick spec hoe on the land and selling off as house and land???
Youngie, the ultimate decision is yours. You either swim or sink with it.
Comments presented come from people who probably have seen a boom & a bust in both property & shares. I’ve been through the cycle & I agree with what they have said.
I have a client that has purchased land in a similar situation to you.
he signed the contract about a year ago and it has now doubled in value and he is due to settle. Not a bad return.
BTW, He has decided to keep them wanted to borrow more than he paid based on current value. No lender would touch it, so we have found a private funder so he can settle (at about 16% interest), then we will refinance him in with a normal lender-hopefully within a month of settlement.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Michael,
sorry, but after hearing Stuart O’Neill’s talk at the APIM seminar I have to dissagree(previously I would have agreed 100%).
No one likes a legal battle and therefore if a property has appreciated (chances are a vacant block will) they are unlikely to take any actoin other than to sell it off at a higher price.
The chances of not selling are remote, and worst case high interest over a short period is n’t going to sting that much.
I cant offer much advice on delayed settlement, as I’m pretty green myself but I have found jumping in with both feet and having everything go wrong is a great way to learn VERY fast.
I personally go ahead with the deal, but don’t mistake it for positive cash flow, because it’s not. profit and cashflow are two very different things! It does sound like it should be very profitable.
Remember land is the appreciating asset houses are the part that depreciate. The ot
hers are right it’s a big step as your first deal but what a step if it pays off!Scott S
“Aim for the stars and you’ll shoot the top of the telegraph pole. Aim for the top of the telegraph pole and you’ll shoot yourself in the foot!”
-anonHi Youngie,
If you are new at investing in property I would go for one with some sort of immediate return – ie., rent. It also depends on encumbered you are – I mean do you have other loans, can you make repayments if it doesn’t sell quickly?
If it is on or near a beach, and you can afford repayments buy it – otherwise I would think carefully.
V. [
]thanks for the feedback guys,
i’ll tell you my situation, im 20yrs old
and i have about $25g saved up, so if i did have to make the payments on the land i could,to me it just seemed like a good quick way to make a profit, as its hard to find cashflow properties that are cheap enough for me (a 20yr old) to secure a loan on,
as you came imagine, the bank doesnt want to give much money to a 20yr old on $33k a year!
i might keep looking around i suppose, i just need to get my feetwet thats all, too much theory not enough practicval experience!
thanks again guys
Youngie
Don’t be totally put off, have you done your research well, if so and you still think this is a real likely outcome give it a go.
Hell at 20 I could buy land for $60k and never did, 12 years later I wish I was gutsy enough to have a go.
Also, I wanted to toss an idea around with everyone on the forum. Now the otherday in my post seminar fog I came up with some crazy ideas and one was … purchasing a block of land (subject to it being excellent sq mtr rate) then approaching some builders in the area to see if they are interested in a joint venture, throwing a house up at no cost to me, their real cost is much less than I would be charged, then selling on completion and sharing the profit with the builder.
Would love to hear your thoughts guys, has anyone tried this before.
Good Luck Youngie[
]Cheers
Leigh K[]Read, learn, grow but most of all just do it.
Youngie,
Further to Scotts email – Stuart O’neill would look at these numbers differently if I understood him right. He would negotiate the lowest deposit possible and he would argue that the worst case is that you would lose your deposit only. So, if you could negotiate a 5% deposit ($7,500) or less then that’s all you’re risking (assuming there are no other penalties). If you are confident in your capital growth projections your cash on cash returns may indeed look good. Something else to think about is negotiating a long settlement in order to ensure the land as the longest possible time to appreciate before you have to settle. When the rest of the development is sold and land becomes scarse, you may find it the best time to realise the capital gains as predicted.
All the best.
Gus
Tip: When it’s your first time, only play with an amount of money you can afford to lose.
I live on the Gold Coast and looking into my crystal ball I am seeing that you are talking about the Upper Coomera area. The Northern end of the G C is as we both know moving big time! I have a friend who bought a property at Paradise Point 12 months ago and has been offered $100,000. more than he paid, he has just secured his 2nd property at P Point and is building villas x 2, and has purchased 3 blocks of land at Upper Coomera and has a builder putting homes on them which he will sell before completion. He is new to property but a very astute businessman and has certainly done his research, so if I am correct in assuming that your proposed purchase is in that area, I would feel confident. The Gold Coast is growing rapidly as you would know and the area between G Coast and Brisbane is exploding. We are about to purchase a reno at Elanora in case your’e wondering why I am not investing in the northern end of the Gold Coast. Good luck, the end decision is yours alone.[
]youngy i’m in the same boat as you, i’m only 20 and earn a very simular wage.
i think the only thing to do is gain the banks trust.. i recently just got a $30,000 car with a $10,000 loan and pay’d it back using almost all of my wage, and some $$ from under my bed, the banks now trust me and i just got my 1st property 90% loan.. the only reason i got this was due to paying off the $10,000 so qick, we all have to start somewhere, its not the best investment around but its good enough and its give’n me some equity for the future.
The way i look at it is we’re starting to do something with our money now so we’re already 10-15 years ahead of our age group, my mates are still piss’n up half there pay each week at the pub.. while i’m planning for my 2nd IP..
Hi Youngie,
Sounds interesting. How about I buy a block of land and then sell you an option to purchase it in December. If the price goes up then you complete the option. If the price falls you can pull out.
This way you carry no risk (but you will have to pay for the option.), and I carry the risk.
I would need to get more info though so email me at [email protected] if you are interested.
Hi Theenjolady,yes your idea is a good one and has been around for a long time in the building trade.
Generally someone that is having difficulty selling land (usually land developers) will approach a builder to do this with.
The way it works is like this. Say you are trying to sell land for 100K but you are having problems, no one wants to buy. You then get a builder and ask him to build a house on a block or two. They will generally be happy to do this (even though they have to be careful since the house legally belongs to the land owner.). However the disadvantage for the land owner is that they only get the money once the house is sold and most of the time only get what they wanted for it at the beginning (i.e. 100k) (Generally it is NOT profit sharing, remember the builder is taking the risk so they want to be well compensated for.)The land owner don’t get into this kind of agreement when land is selling fast though. They only do this if they are having PROBLEMS selling the land and can wait to get their money.
Hope this helps,
APIM
*************
Australian Property SoftwareAPIM: http://www.apim.com.au
APDM: http://www.apim.com.au/apdm.htm
*************
thanks for all the input guys,
ive been thinking about it a lot, and its really just like putting 10g away in a fund for 6 months and watching it grow, as long as i can get pre approva;l on a loan for say $150g as ‘back up’ if it doesnt sell by the settle,ment date (which remeber is no sooner than december at the earliest, negoitiated to an even later date)
and another thing the land went up another 5g since this post ….. under 2 weeks….[
]thanks again for all the input… time to have a go in the real world i think…
Hi youngie
im a bit late on the seen but I might be able to shed some light for you. I actually do what you are suggesting in vic. So far it has paid good dividends. I am about to purchase another block of land settling in 12 months.
It is risky as long as you are confident that if it will not sell you can cover the payments.Iv worked it out that at a 90% lend you would be making payments of $600 per month at an intrest rate of 5.35. If you can live with that then do it. As you know it is land that inreases in value more so than buildings.
Just a note even if you flip it before settlement you will still have to pay stamp duty. An evel that is unaboivable.
So go reap the rewards
John
yeah im looking at setting up a trust first, because i want to do it right from the start so , once i sort out how it want it setup , im going to have a go…..
thanks again guys
Good on you youngie. I wish I’d had the knowledge to do the same at your age!
I did however invest in my parents house at 22 but it took me 6 years to find an investment strategy that I felt I could make work. Now I’m going hammer and tongs and not looking back.
I’m constantly amazed by how much I’m learning every day, I can tell you that after your first IP it will only get easier for you.Best of luck,
Scott SP.S. Let us know how you go.
“Aim for the stars and you’ll shoot the top of the telegraph pole. Aim for the top of the telegraph pole and you’ll shoot yourself in the foot!”
-anon
]
]
]
The topic ‘land opportunity’ is closed to new replies.
