Hi guys been in and out of the forum for a while..well more out than in. I,ve been working towards saving for my first house, but house prices have been sky rocketing here in melbourne. I recently came accross a house being built ina well known suburb 1 mil with stamp duty savings…my savings 145,000. The terms of the purchase would be to lease back to the builder/developer ofr the next 2 yrs at 6% of purchase price before i am allowed to move in. This sort of works out well as for the next year and abit i will primarily be out of melb geelong/ballarat and work provides accomodation while i m there. i am new towards buying display property and am a bit cautious so would appreciate any advice or help..the house is a 5 bedroom and total area including land is slightly more thsan 500m2. I am guessing i will not be able to claimn the first home owner's grant but am willing to for go this as the lease back will pay for most of my mortgage for the next 2 yrs. I am securing a 90% loan with no mortgage insurance as well. PLease advise me in regards to any potential hazards of this kind of purchase…All input would be appreciated. Thanks
mmmmmm
Sounds like a good deal if in 2 years time the value of the property will be more then the purchase price….
You would need a solicitor to make you an iron clad contract with the builder….covering every thing
Just hate to see you take out a large loan hand over the funds and the builder goes bust leaving you with a half finished house and a big mortgage over the property etc etc
The best advice is seek a competent property lawyer to advise you on this one.Thanks nucopia; will look into it, the property should be ready by the end of the year. Does anyone know of any good property lawyers around, would appreciate a list of names and contact details. Any idea on the accesibilty for first home owners grant/
we lease our displays out at 7%…. pretty standard in Qld… can you negotiate the deal???
The potential problems here are usually
1) Delay in building – is the house built already? It can cost you big money if you are paying a mortgage and there is some problem with completion of the project
2) The property is worth less in 2 years time. This happened initially to a lot of people with Docklands apartments, but a bit of research, common sense and a very strong nose for the "it's too good to be true" deal will help avoid these issues.Chris
in my experience of this type of purchase the builder inflates the price to cover the high rent they pay so at the end of the day you dont make anything unless your in a rising market or you buy a liability in a declining market
check out the price of similar established houses in the area and compare
beware of your emotions wanting the property verse the numbers$1 million for a first home?
And 5 bedrooms on a 500sq/m block? Sounds like a McMansion.
I hope you have lots of kids. If not, why the bedrooms; is it going to be used as an I.P where you rent out the rooms?This whole equation scares me. If you want a good investment you can do it by spending FAR less than this, or spend the same money over a couple of properties and improve your return and spread the risk in the process.
This sounds dangerous what you are trying to do; you will have very high debt , and even though you may have the income to cover it, what happens if your property goes down in value over the building time (there is no guarantee the property will go up when it is completed), and what if your job disappears, what if you get sick and can't work? These are all worst-case scenarios, but they need to be considered to minimise your risk; especially with $1 mill tied up in one property.
As the others have already said;
1.don't buy on emotion.
2.check the recent sales of comparable properties (not the off-the-plan sales; the RESALES),
3.builders/developers load the price to make a profit,
4.you could buy now and find the property is worth less on completion; especially in that price range.
5.6% lease back is not doing you a favour; finance is over 7% now. The lease-back is just another cost for the builder factored into the price (that you ultimately pay).With the deposit you've already saved, you could buy a very nice EXISTING cheaper property in another suburb that will enjoy good growth, good 'on-paper' deductions, use it as an I.P and it will be pos geared from day 1. You will need to keep renting where you are of course.
totally agree with Marc above, scary stuff!!!
consider buying one or two dual occ. potential homes for that money and get plans and permit for a second dwelling, this gives a big buffer against any down turn and adds instant value.Thanks all..
Scary stuff thats for sure..
The property is on its way ..looks like completion will be in the next 6-8 weeks.A house about 4 rows down sold for 1.29. The house 3 rows down being advertised for auction in excess of 1.35 mil(527m2).These are all resales.Slight alteration to size of this house its actually slightly less than 500sqm.In terms of my job i see where your coming from …I have income protection insurance for health if needs be…. The first 2 yrs this will work as an ivestment property with the lease back and all (will try and negotiate on the 6%). The price of this house not increasing well thats always a risk…if one doesnt do the homework there is always this price to pay. Prices in this suburb have been going up 10% on average yearly. The property is within a 10km radiusof melb so it should carry on , but with subprime etc….?? Has anyone actually purchased one of these display houses before? .Hi, I haven't ever bought a display home but I know that there were two selling in point cook a few months ago and had been on the market for around 6 months. They were asking $720k, but the agent told me that the builder would most probably accept high 500's and "may even accept 550k – you never know your luck". Also, don't look at the asking price of the neighbouring properties, look at the actual selling price.
Well bottom line at the moment the builder wants 100k more and i am not ready to budge..so at stand still might lose the property..oh well… I have a question if one buys an off the plan property and signs contract with developer and not the builder is the builder warranty insurance still valid.. ?? Hmm point cook wouldnt pay anything more than 500k for a mcmansion there
Answered my own question by calling consumers victoria…warranty insurance still valid..
Hi. It looks like you got lots of cash to invest. I suggest that you put it in a properties that has withstand the weather. I am renting an apartment in Five Dock at the moment. They are asking for $750 for a 2 bedrooms. What the buyers are not aware of is the foundation in the underground carpark is cracking and water are leaking everywhere is winter. The building is also cracking. This building is less than 3 years old. Just a warning for anyone thinks that buying apartment of the plan.
Thanks for that..i guess this is where your building warranty insurance will kick in..
1 Mill is a lot of money, with a lot of money comes a lot of risk.
I would rather buy 4 IP @ 250K rather then 1 @ 1 Mill. If all 4 rise 10% you make your 100K, if only 3 do, well you still make 75K.
Risk ratio, just dont really like putting all my eggs in the one basket i guess.
Cheers,
DIM.Have decided to go with a slightly cheaper off plan purchase in an adjacent suburb in melbourne, could anyone reccomend a good solicitor who knows the in and outs of off plan purchase.(either in melbourne or geelong)thanks
You must be logged in to reply to this topic. If you don't have an account, you can register here.
