Hi everyone,
I would like to get a bit of feedback on an idea that I have. As a new investor, I put a deposit down on a unit nearly 18 months ago (off the plan) as yet it still hasn’t been constucted or even started…. When I put hte deposit down my strategy was to buy it hope that I could afford to pay the difference and wait for the price to go up.
Since then I have done a lot of reading and have realised that my stategy was quite weak to say the least. And if I was to take that approach now even with the growth in the market I would probably still have a shorfall of around $70/week after all expenses.
Now to give a little more background on the property:
Cost – $158k
Deposit – 5%
Expected completion – 4-6mths+
Current estimated value – $210kI am thinking that given the capital growth, this would make a great candidate for a wrap. Even at market value and bank rates, I estimate that this would give around $50+/wk positive cashflow.
I am also thinking of moving in temporarily, to make the most of the FHOG, which should also give me time to put the deal together.
I would appreciate a bit of feedback from vetran wrappers and especially those who have put together similar deals.
BTW, if things are a bit slow I am also investing a number of house and land packages that could also be turned into a positive cashflow with a bit of creativity.
Apart from the steep learning curve, my only concern is securing finance, as I have just recently started a part-time job and my wife is self-employed. But I won’t let a small thing like a small income get in the way.
I hope you have a decent deposit plus the fees if you want to settle on this property. I don’t know where your unit is situated, but most off the plan units have decreased in value in the last year.
Also, it is the lenders discretion whether they will go on current market value to work out the LVR. If they want to see the ‘hurt money’ and go by the contract price, you will definately need the deposit plus costs.
Regarding the FHOG, you need to live in the property for six months to be eligible. Why not wrap it to someone else and use their FHOG and save your for another day?
Robert Bou-Hamdan
Mortgage Adviser
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdFrom a vendor view, I think you should cut down the expectations of making alot of $$$ on a wrap. Already you are minus -$70 and so another $50 will add $120 on top of the repayments, which can be alot for an apartment (wrap clients usually are families that want to buy 3/1, but you can of course wrap units, it’s just harder).
Juat make sure your not to far from the rents, as probably people in your market (young, more likly to be single, etc) will compare it to the average rents, and if they don’t feel like they are making enough from the deal, more willing to walk away from it (and it will be harder to sell).
Just a few thoughts…
Rgds.
Lucifer_auThanks for the feedback, I may need to rethink my strategy a bit, particularly WRT financing.
One question though:
Why not wrap it to someone else and use their FHOG and save your for another day?Is it possible to buy a property and wrap it and still save the FHOG for another property? I thought it was only available on the first property, hence the name.
I can also see how this deal may not be attractive to someone who just wants to rent, but for someone who looking to enter the market, this may still be quite attractive. It may even be attractive to another PI who wants to negative gear the property as the property is in a high growth area, quickly growing population.
Anyway thanks again. I still have a bit more time to figure out the best strategy, it may be best to flip, or even bear the load NG, there is pleny of time.
Regards,
Martin
It is possible to wrap where the repayments would be much higher than the rent, but it is just a little harder finding people willing to pay that.
I beleive you are still eligible for the FHOG if you have not purchased a home to live in before. check this with the OSR in your state.
If your unit values as you say, then you should be able to get 100% finance pretty easy as long as you can service etc.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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I am going to post separately about the FHOG. Look for it.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltddotechin I am not saying you cannot get an extra $120. I’m just saying it’s best to get to a position where both sides win. For example if you can get the $7K FHOG from the new buyer it provides some profit, also if you add an extra $20K on the sales price (you must be resonable on this though), you have made a further $13K ($20K End Price – $7K Deposit = $13K).
In my view see this as mainly a way to get out from a bad position as well as a valuble learning experience. Once you’ve done one you will find it alot easier to do more, so don’t worry too much about maximinsing your profit, just make sure you make one and it’s a win-win deal.
Rgds.
Lucifer_auThanks for all the feeback. I found the info about the FHOG http://www.firsthome.gov.au/
Regarding making this a win-win deal, I think even at around $120/wk above expected rent it is very attractive for someone looking to get into the market in this area, especially if the sale is at or even slightly below market value, interest is at bank rates and the deposit is minimal.
Given that this deal is most likely to attract first home owners and possibly investors looking for NG IP with growth potential, what do you think is an appropriate deposit to ask for?
BTW, I have learned heaps through browsing the forums. I can’t wait until I have a bit of experience so that I can contribute more to this great pool of knowledge, rather than just asking questions.
The post about the FHOG has been up for an hour but good work to go looking and finding it!!! It is the best way to learn.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdI guess I did do that a bit backwards… [upsidedown]
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