I have found what looks like a brilliant investment in Byron Bay. Have done the sums and it looks like a sound investment. Most people I talk to tell me not to touch it and that the risks are too high. I have checked out the builder and developer and both have flawless track records, the property is top quality and is walking diatance to both the beach and the main shopping area, the market is booming in Byron Bay and in my opinion will only improve. With a small deposit today and the rest to pay on completion in 2009, yes there is a risk but I think the risk outweights the potential retuns. There is also the option to flip at any time and although I understand their would be CGT, agents fees etc to pay it is another option.
Has anyone had experience of buying off the plan and am I being a little niave. Any advice, tips, horror stories or positive ones would be greatly appreciated/
All off the plan deals are based on assumptions – lots of them, the further out/longer the project the riskier those assumptions become. There are projections for future market value, future rental, depreciation etc. Your only known items are the upfront purchase costs (in today's dollars).
Get familiar with your target market (if it is Byron – either eco tourists, grey army/life changers etc, generally cashed up).
Check out what similar resorts/locations are worth – this may mean looking outside of the box ie Coffs Harbour/Ballina/Port Mac/Coolangatta etc. Familiarity with similar operations give you a great insight of how this one may perform. Remember, that the first few years are the hardest as they will be establishing a client base, high expenses and low returns (unless all of the planets are aligned).Assuming that you are buying into a hotel/resort type operation:
What restrictions will there be on the property owner – is there a management company to be appointed to manage the premises? What are their duties? What fees will be payable to them? Is income pooled or assigned based on actual occupancy? Does the management co pay a fixed rental to the owners? How long is the management agreement? What escalation costs are factored into the agreement? Are owners liable for periodic refurbishment? If so, how often?SNM
Yes I've bought OFT and I sell them too. I can give you a positive story. I bought one at Parramatta around March this year and paid $380k for a 2bed with settlement end of next year. At first prices seemed abit high for everyone but looking at it now, it feels like I got a bargain price. The amount of money being spent on Parramatta is phenominal and it's really pushing up the property values higher. So if you select the right area then you got alot to gain and little to lose.
I just had a look at byron bay at homepriceguide. Units have gone up by 3% over the last 6months and 10% over the last 10years. Houses have dropped by -15% over last 6months but over last 10years have gone up by 15.1%.
All those people who you've been talking to, telling you risks are too high; are they investors themselves? Do they have experience working in the property industry? If they do then maybe they are right. Otherwise everyone like to give free advise.
I heard this a few months ago from a friend of a friend that lives at Byron so do your own research. (my space bar just carced it) About 6 – 12 months ago the council upped the rates massively todiscourage investors in Byron Bay. Loads of investors offloaded their properties and prices slumped as there was a glut . May be something to consider…….
I noticed Margaret River WA does this also which tends to keep property prices low.
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