Hi everyone,
I was just wondering what everyone thought on the concept of property investment through new house developments.We have been approached by a guy who is selling the usual package of- Le me help you "secure your land-build a house investment- reap the tax and rental benefits to pay off your principal place of residence" all while paying interest only on your investment property.
My wife and I are looking to enter the property market, but only at the right time. We are a young couple who just got married and are currently paying off our house that we live in.
I am just wondering if anyone has any comments on whether its a good idea to go with the new development idea or maybe buy an established property.
The guy found us through a telemarketer and mentioned that for $400k we could get house and land. We live in Brisbane.
Thanks guys, I am a property investment newbie, but am passionate to learn about it and hopefully provide my words of advise later on down the track!
JustinHi Justin,
this can be an excellent way to begin your investment portfolio.
DO YOU RESEARCH!!!!! is all i can say
there are many companies out there who are not trustworthy.
look for independant market advice and guarantees not neccesarily rental guaranttees but probably more important is build time guarantees. maybe approach some other similar companies and test out what you are going to get.
cheersHi David,
Thanks so much for your advise! This is all quite new for me, so any help is really appreciated! After speaking with the financial advisor/home loan broker he was very thorough on what risks there were and what I should be asking of the building company (like you said – build time guarantees, penalties for delays etc.)The property developer have now set up a time for me to visit some land, and of course are asking me to put $1000 deposit down to secure the land if I like it. Should I go in cautiously and resist paying the $1000? I am planning on haggling the total package and asking for more inclusions to see what they come up with.
Thanks again mate!
JustinDefinetly hold off with the $1k deposit. The market has slowed right down and time is on your side. You need to get an independent valuation on the land before you commit to it you can aslo do your own comparables on the land component as well by checking against close by land sales. You also need to check the price/m2 for the new build.
Once you have done this then you may be in a psotion to commit. Also suggetst hat you get a Residex growth report for the postcode to make sure its not a dog area.
hi Justin,
we have just finalised our first investment and it took 11 months to build and settle and all the crap in the middle, but at the end we have a great house full of deductions and depreciation, a great tennant paying good rent and in an area that will we hope increase in value. We bought it for an absolute bargain of $275,000 for a 24 sq home with all the mod cons close to the city, and a day after we settled.. 2 weeks ago, we were offered $315,000. we want to keep it for the long haul.get on realestate.com and look all around the country, not just in your local, especially for new housing development/estates and just keep looking and watching prices and sales most of all. Pick a few homes in the area and put them in watch, you will start to see a picture of where is a good area. Do a google earth to see where you would want to buy. definately dont do an impulse buy, too much at stake. I searched around for about 6 months and went from Qld to Syd to Melbourne and settled on Melbourne because i see them in a time warp where the prices havent caught up yet or the rents. More than happy with my purchase, still bouncing off the walls.
good luck
melDANGER!! DANGER!!
Really I would be doing a lot of research first.
These guys don't go cold selling for no reason. Check out the area, what prices places are selling for, how long are they on the market? What rental vacancies are like etc. Is it a massive development? if so there will be hundreds of places all for rent at the same time.
These guys make it sound so attractive " Your house will be paid off for you" etc.
Work out the REAL costs of owning (rates, insurance, interest) minus rent. Can you afford it if not rented?Don't rush into anything. Please do your homework. There are lots of opportunities out there. Many have been burnt by getting suckered into making easy money. There is no such thing.
Sorry to sound negative I'd just hate you to believe everything they tell you. I can't stress it enough DO your homework. Speak to real estate agents in the area for a start.Thank you Bardon, Mel and Catalyst for your very valuable advise!!!
I will definately be using it! I plan to have a look at the property developers package (land location & house inclusions) this Sunday 1st of June, go home, DEFINATELY NOT give them $1000, do some investigating on its growth potential (like Bardon said- independant valuation of land) and future infrastructure (schools, shopping malls, public transport etc.) Make sure it suits out budget and include EVERYTHING that Catalyst has mentioned.
In the meantime, let these guys stew on my counter offer of price & inclusions. In my younger days, I would have probably naively jumped into this offer that "sounds too good to be true" Now as I get older and through the wisdom of a good woman (my wife hehe) I am learning to tread slowly…
Ask the guy if he minds if you get your own independant valuation done on the properties first before you sign anything, and watch his response.
Do your own research on the values in that area – over several weeks and re-assess.
It's probably a two-tiered marketing scam and your the next bunny if not careful.
Hi Justin, good on you for asking lots of questions first.
Your probably aware the weekly repayments on $400,000 @ 9% interest only is app $ 692.
Plus insurance, rates, etc. Yes you will get a standard depreciation schedule from the builder which does help at tax time.
A few things to consider and not to respond to are: is you and your wife's employment rock solid? Can you tolerate the shortfall in repayments?Firstly, don't take your credit cards or much cash when you go on the 1st June. There is no rush and there are a zillion choices.
A first IP of 400 big ones is a huge jump. Not impossible, just a big first one. If your income can cope with the assault then great.
What are neighbouring properties renting for? As every one else as said, what are they valued at?
Why do people live in the town? What is the attraction? Are there schools, a hospital, decent shops?
Lots of questions to answer.Thank you guys, I now have a plan of attack for this Sundays meeting! and I will let you know what their expession is when I ask to get an "independant evaluation" done before I do anything else
Lalibella, yeah, the financial broker went through the numbers with me and actually did the calculations at a 9.5% interest only loan as a worst case scenario. He did mention a M5 (?) form that I was to submit to my employer for pre tax benefits?
So, after this meeting: 1. NO $1000 down. 2. If I like the area, I will do some investigating on its pro's and cons. 3. Negotiate house inclusions only when I feel comfortable with the location. 4. Hope the wife gets an inheritence from a rich dead relative soon.
Any other suggestions? Cheers guys!
JustinInvesting into property by adding value is an excellent way to start in property. Typically a strategy such as this should see you create at least $50k in equity.
However, I would encourage you to do some research first as not all areas will enable you to realise such a gain. The research is very simple as it is just a matter of looking at your total build cost versus what similar properties are selling for in the estate. If the area is good you will fing that there will be several builders selling spec homes. If builders are staying away then you have to wonder why. I would encourage you to do the same in look to buy into an areas where builders are confident in investing.
Good luck.
Sorry to sound cliched, but the common message I seem to be hearing is "location location location"
Yes, a property CAN be a good investment as long as you are well prepared for all contingencies (whether they be enough buffer for increased rates, no tenants for a period, working from a single income if your partner loses their job etc etc) as well as having the right location that is expecting sustainable growth in land value (due to new development of more houses, schools, shopping malls, public transport etc)
I haven't got a call from my potential real estate broker/agent/developer (whatever they call themselves) to confirm our appointment on Sunday, but the first thing I will ask them is what suburb and street is the development going to be in so I can do some investigating myself first. Hmmmm I wonder if they will cotton on that I had received advise from someone. Ie You fantastic guys on this website!!!!
Justin
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