Hello,
I’m new in the Investment Property game and have a dilemma. I’m not sure if it’s better to buy a brand new home (house&land) or go for a youngish property. I’ve been told I’ll save on the stamp duty with the 1st option. But when I look at stats that I’ve obtained from Residex the amt asking for new properties are a good 20-30K higher. That to me doesn’t sound right which is why I’m leaning towards existing properties in decent location. Any thoughts please.
Also, I c there a post about DHA properties with their pro & cons…I would like to get some options on agents such as OzInvest who offer a lease back options which seems very attractive. From my investigation with price comparison they seem to fair pretty well. Has anyone else used their services????
Cheers [smiling]
The other benefits you usually get with a H&L package are warranties on the house (often 5 years or more builders warranty on the structure and 6 months on fixtures and fittings). The only other mob, besides Ozinvest that I know of are Kaizen Property Sales. Both are pretty decent in their dealings with investors and usually give you a good deal (surprising to hear it’s prices 30k over existing houses).
Thanks for that…the 30K I mentioned was the difference in price between and 1-2 year old property and an H&L package. With OzInvest I’ve found there’s not much difference with their prices with other H&L pkg’s out in the market, in fact they were a bit under in some cases. Your feedback is much appreciated.
Are there any other comments out there that I can assist me with this decision?
Cheers [goatee]
I dont know all the details, but if your going to be saving 30k on the difference between a brand new property, and a 1-2 yr old property, go with the 1-2 yr old property. You’ll still get heaps of depreciation, which is why i assume most people buy new houses as investments. Keep the money in your pocket, and still get some back at tax time? Sounds good to me…
I think it is widely accepted that you will get greater capital gains from an existing property in a good location as opposed to a new property in an estate EVERY TIME…, when comparing properties of similar cost.
Live, Learn and GrowLifexperience
I have to be somewhat contrarian here. Statements like “widely accepted” tends to stop people rechecking the fundamentals of a deal at a point in time.
There is a thing called the “developers premium” that comes into play when building versus buying a 1-2 year old property. We built new homes and sold them for greater profits than buying a 1-2 year old property and then selling. The reason is that the new property often has features that even one year old properties don’t have but the market wants and this creates the “developers premium”. Think about the craze for “home theatre” rooms. If you bought the year old property that didn’t have one versus building the new one that does, you missed out on market percieved value.
So before accepting maxims that might be “widely accepted” examine them for fundamental facts first. Then make your decision for those reasons. Don’t make your decision by following the crowd and their “widely accepted” maxims.
Happy investing.
kmiddlet,
Thanks for your indirect retort that was dripping in condescending disdain.However..
Your example is not relevant to my statement.Building and selling property is a good way to make money(and a lot of work and effort too), but it’s a totally different issue to the selection of an investment property for long term capital gains.
And I find it quaint that you feel the need to point out that further research is needed. Point out the bleeding obvious!
The house component of a property always depreciates over time. It depreciates the most in the first few years. FACT.
The land component of a property is the driving factor behind the capital growth. The better the area, the more the capital gain. FACT
So……
if you had $400,000(or any amount) and were to choose between a new house from a developer OR a older house in a better area. When both houses are the same layout.
Based on this MY OPINION is that…..“I think it is widely accepted that you will get greater capital gains from an existing property in a good location as opposed to a new property in an estate EVERY TIME…, when comparing properties of similar cost.”
Live, Learn and GrowLifexperience
Touchy touchy lifex.
Hi dedfred
I go with brand new or house land packages. If you can get the land at a good price and choose a good value builder you can come out with immediate equity every time without waiting for time to give you CG.
By selecting the right area and picking up a block for around $150,000 and spending $200,00 on construction, landscaping etc you can pick up $100,000 immediate equity if you have researched and found an area that would offer an end value of $450,000. These are rough figures of course but it gives you an idea. On top of this people will pay more rent to live in a brand new property and you can claim maximum depreciations etc.
Better yet if you can buy a duplex block and increase your equity even further.
Good Luck!
Sparky
For a new house and land pkg you pay stamp duty two times plus GST.
Once when the developers sells the land to the home builder and when you buy it. Thats one extra stamp duty plus GST of 10%.
If you buy the land and put the house on it yourself thats one lot of stamp duty less.
Hear hear ozsparky.
What you describe is what I termed the “developers premium”.
It doesn’t always work. That is when lifex’s proposition kicks in.
However odds are in your favour going down the build road instead of the one year old road. The caveat is to research first.
Originally posted by kmiddlet:Hear hear ozsparky.
What you describe is what I termed the “developers premium”.
It doesn’t always work. That is when lifex’s proposition kicks in.
However odds are in your favour going down the build road instead of the one year old road. The caveat is to research first.
I Went…I Saw…help me Conquer!!!
OK, so I flew up and I’m back…and it was a great trip. I’ve locked my sights onto Morayfield’s and Springfield Lakes…I’d made a few appointments prior to flying up. My inspections included H/L pkgs (I know…I know, I had to see it for myself), younger properties (1 – 3 years old) and 10+ year old properties.Well, after 2 day of getting lost a few times in my hired car and covering about 450Km in that time, I think we’ve been able to lock down just two that we like and I’d like to get some feedback from you guys.
I inspected 13 properties in Morayfield’s, and 4 in Springfield Lakes.
Properties we Like:
Morayfield: 4B+2T+2LUG.
1. 3 year old property located on a large block of land (700+ sqm) situated only 1.4 Km from Morayfield station and shops. It also has a local (small) shopping centre round the corner for day to day needs.
2. Local primary school is just around the block.
3. It has tenants in place who are keen to stay on for a long term.
4. The only issue that was brought to my attention is that there is a slight flooding issue in the backyard when there are heavy rains. This is apparently caused due to bad drainage that trickles on from the neighbour’s property.
5. The flooding does not affect the house itself and the tenants are extremely happy the way it is.
6. I’m not sure if the drainage issue can be addressed by the council or even if it’s a big issue at all.
7. Approx Gross Rent Return 4.64% (this is calculated on current advertised rate of the property which is negotiable).
8. I also spoke to a couple of the surrounding neighbours who had good things to say about the street and the locality in general.
9. I’m told the current owner is looking at liquidating this asset for personal reasons.Springfield Lakes: 3B+2T+1LUG.
1. This property is currently owner occupied and is situated on a rather small block (300+).
2. The property is just over a year old and is well presented; I’m told by the agent that it can be very easily tenanted.
3. It has A/C, dishwasher and few other features that come with newer properties.
4. Its location is fairly good as far as I’m concerned as its located near a park, a new school and only a couple minutes drive to the new shopping centre and university.
5. There were no obvious issue that I could pick nor was any mentioned by the agent or current owner.
6. Based on forecasted rent this property would give me a gross rent return of 4.43% (again, this is calculated on current advertised rate of the property which is negotiable).OK, now for my thoughts on these properties and locations and if you could pls respond if you agree/disagree, or think I’m wacko:
1. What I’ve come to understand that Morayfield’s has existing infrastructure and from what I can understand its a Blue Collar area with low – medium income earners with a big rental property demand. (Agree/Disagree)
2. Springfield Lakes has a fairly even mixture of White and Blue Collar. It has some fantastic infrastructure that is currently going into place and there obviously great potential. (Agree/Disagree)
3. Agents tell me that there is always a demand for rental properties and that it’s quiet possible to find a tenant prior to settlement – this was the trend for both suburbs.(Agree/Disagree)
4. Springfield Lakes seems to be a suburb with higher income earners than that of Morayfield’s…this was purely based on the people, cars, houses etc that I seen when driving around. (Agree/Disagree)I personally prefer the Morayfield option because its safe (Yes I’m CHICKEN). Provided I can negotiate the right price, I’ve got a happy long term tenant in place and I know for a fact that the suburb is experiencing good CG and is predicted to continue with the steady +ive CG over the next 5 – 9 years.
But, but…but…but, there always has to be a BUT . Springfield Lakes, from what I’ve seen, the University, the Orion Shopping Centre, the TAFE college, the 5 or 6 schools etc…etc seem like a place set to experience a big leap in CG over the next few years. Although the land size is smaller, as long as I can get a tenant into the property I’ll be set. This is also the reason I’m anxious to choose it, as the thought of not being able to tenant it scars the living crap out of me (did I say I was CHICKEN).
Please, Please hit me with your thoughts and suggestions and if I haven’t said it already…I REALLY APPRECIATE YOU GUYS TAKING THE TIME TO RESPOND on this post. Your advice had been great.
Cheers
dedfred
Hi Dedfred,
Here’s another option for you- You could buy a block of land and get a builder to construct a house for you. That way you cut out the middle man and you don’t pay developers margin because you become the developer.
I did it this way in a location not far from Morayfield and on completion the market value of my property was about 40K more than I paid for it . You need to take into account the holding cost of the land until construction is complete but doing it this way you save on the stamp duty cost that you would pay on buying an existing property.
I interviewed builders and got references until I found one I liked. The builder I picked did a great job and had his own team of tradesman so he got the job done fast and was very professional. It’s a little bit more of a hassle doing it this way but I saved myself $40k by doing it like this
Todd Burns
http://www.freepropertyhelp.com.auHi Crusher,
Tat’s not a real option for me…living in Sydney and depending on a builder to do his job is a big ask. With my family and work commitments I’l find it a big challenge to commute inbetween states to monitor progress.
I did think of this option in the beginning but ruled it out.
dedfred
We are in Victoria and 3 years ago we bought a block in Perth, and then engaged a builder to build on it. 3 trips only:
– first to select a design and sign up
– second to see the slab down and measured it up to ensure it complied with plans (past experience showed that this is the most critical part where any problems are often expensive or difficult to rectify later)
– last to collect the keysI had the builder email us digital photos during construction to confirm progress.
I wouldn’t be frightened of trying to manage a builder by remote control. Pick one of the big guys and you are usually OK. A previous post about getting references etc is an excellent technique.
I can certainly recommend buying land and building, we bought land in qld while we were in england and had a house built before we came back.
It was no trouble at all and turned out well, just pick the right builder.
While we’re on this topic can I get some views on Morayfields as a future CG suburb. My research tell me it has good potential but there are some IP guru’s who think otherwise.
Can I pls get some feedback on this.
Dedfred [suave]
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