Off the plan purchase

“I was wondering if anyone had any advice on the possible pitfalls with this kind of purchase and anything we should look out for”

That the numbers stack up and that there are no little fibbies in the deal!

But alf, surely if the property was not completed, you hadn’t paid for it, and therefore there were no interest costs, so it didn’t matter if it was complete or not?

I know with some of our OTP purchases 2 years ago, we were cheering when there were delays, as we had a locked in price to purchase, values were rising all the time, and we had not had to pay any money (other than our deposit which was in cash, as we weren’t organised enough to have Dep Bond or Bank Guarantee).

Cheers
Mel

Hi Melbear

Well i wish

We ahd gone to an property investment advisor and paid him significant dollars and he was looking over things. I recall asking him is there any risk to this his reply:

“I wouldn’t want you to lose any sleep at night”

What was set up were progressive payments so the bank would release funds at certain stages of the project. Whe the second or third stage came along we had to commit the payments of the funds released. He had sated that the 221d component would fix this. Yeah right.

Well it was due to inexperience and thinking that because you pay someone they will do the right thing by you.

I would never do it again that way. After the fourth stage we were fully exposed to the loan and there were delays to the practical completion stage. Fixed interest rate for one year expired and rates had climbed to 8% at the time.

I did lose some sleep

regards
alf

Hi Melbear

Yes it was a bugger but i learnt alot and luckily the property has risen in value.

My main thing at the moment is loan structure and whats the most appropriate.

The variable/fixed argument is just as bad as the sell/dont sell.

You got any opinion on this you seem pretty shrewd with the figures side of things.

cheers
alf

Hi BB,

Check out this link (top paragraph)
http://www.brisbane-australia.com/102852.php

You could always find out if they had any links to HK [] (okay, bad joke, naughty sooshie! [}])

Okay, so I’m sitting here, whilst Mike and little Simon are watching Pingu (Simon sicked up all over me…okay more info I know…[])

Back to business… from the little research I did just now, there are a lot of property developments for sale in Brissy, what makes this one stick out from the rest ?…

Perhaps take out a little longer on the deposit bond… Get a good solicitor to look through the contract. We had one, who did this and found some things we wouldn’t have thought to look for..

Go in and have a look at the model of the development… ask to speak to someone at Property Direct. See how easy it is to get answers before you put up the money.

Mike and I went and had a look at the models of the properties being developed, even though we got out of the deals later. It was an interesting experience and it taught us that our opinions didn’t matter only our money did.

I think I’m getting brain foggy now…

Night Night
Soosh [|)]

When a problem is created the solution is created simultaneously

I went to the property direct intro night here in canberra a couple of weeks ago. not that i wanted anything, its just that my boss wanted to buy.
i took a couple of their phamplets with me and from what i could tell was this:
1. IP relied on neg gearing pos cashflow.
2. No strata management in place, ie those numbers were’nt added in.
3. They assured everyone that the 14 km around brissy was the place to buy due to demand.
I asked them where they got that information from and it was a “gut feeling” from being in the game.
(I dont know where they got that from but the RBA has said the only thing keeping the housing boom going is demand from investors.)
4. There was no rental guarantee, so in effect they were giving numbers that they thought were right.
5. They couldnt tell me how many developments were going up in that area, nor vacancy rates.
Of note, was when i turned up and gave a wrong phone number so i wouldnt have to put up with the “follow up call” the buggers got my home phone number anyway.
I’m not saying they are a bad deal, but i dont live in brissy, nor do i know the area. I’ve told my boss the same thing… so at least he’s starting to learn to think for himself and question everything “due diligence”.
I run off the theory, that no bugger is going to make me rich, i have to do it myself, believe nothing and double check everything.
in a rising market mistakes can be made and covered up due to capital growth. in a falling market those mistakes may eat you alive.

Hi

I live in inner brisbane, and on my way to work I pass 3 large unit blocks being constructed, and many just completed, with lots of for rent signs hanging off of them. There are also heaps of unit blocks nearing completion in New Farm which is comparable to Woolloongabba in distance to the City but without the “latte set”, atmosphere and facilities of New Farm. I think that in the next couple of months prices will stall and perhaps even shrink. Rents will probably also drop. I’ve noticed in my own suburb (Morningside) that there are a lot more “for rent” signs going up, and staying there for longer.

Is the unit on the Corner of Ipswich Road and Stanley St? If so, that’s one awfully big project with lots of units to unload. I can’t comment on the set up of builders as I’ve only noticed the sign in passing.

If I was going to buy, I would probably look at New Farm instead. Its close to The Valley and has better facilities.

My gut feeling is not to buy “new” right now, if at all. If depreciation is not an issue, it might be a better option to wait a bit and to buy “second hand”

Good luck sifting through everybodies info.

T[]

Remember guys that sometimes a builder cannot get finance until he has sold a number of the units off the plan. This puts him under some pressure.

If one is dealing with such a builder direct one may be able to not only get a better price but, if he is very anxious to get started with the construction, he may even be prepared to give you a contract for each of several units and at the same time he may well be prepared to put an escape clause in the contract allowing you to not proceed with the purchase unless you choose to do so.

The fact that the builder may be hoodwinking the lender hasn’t got anything to do with you.

The other problem of finishing up with a shabby
building can be controlled as the contract should contain a set of standards. Have an inspection carried out by an architect and you may be able to have the builder rectify the defaults.

Be aware that a large builder doesn’t automatically mean a good job !!

Of course if one hasn’t got the time to make contacts with builders, well then by all means pay the higher price through an estate agent and miss out on being able to negotiate an escape clause.

Pisces133