Hi All
I am currently serching for my first investment property.My confusion is whehter i would go for the establiashed property and start worrying about interest and renter and other maintance with the property or buy off the plan (pay 10% deposit) and seat back till next 1.5 to 2 years.
Any advice would be greatly appriciated.
Thanks
Hi Kondalilla
One factor that may influence your decision is the future cash flow position of your new purchase. If you're planning to purchase a cash flow positive property then I'd probably buy it now so I don't miss out on the extra money in my pocket for 1.5 to 2 years.
Of course, if you're planning to purchase a negative cash flow property, then you may take a position with an off the plan purchase, thereby backing the potenial capital gain of the development and the area.
I have both negative and positive cash flow properties but I usually don't buy direct from developers, as I'm always unsure how prices may have been manipulated in the new development. I normally buy from the person that bought from the developer, as time tends to establish a real price for the property.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi all,
Paul – I am interested in your comments about not purchasing direct from the developer because you are waiting for the "real price". While using this strategy have you found your purchases to be cheaper than the price the developer was asking?
Regards,
Andrew
itsandrew
Go as far as you can see and you will see further.
Hi Andrew
It's not always the case but a 3 bed apartment in Newstead, Brisbane springs to mind. The guy we got it from paid $440K from the developer and 12 months later couldn't sell it for $390K.
It's also worth looking into the case of the Pacific Blue development in Salamander Bay. A couple of years ago we were offered a dual key apartment for $750K, with $600K down and the developer carrying back $150K. They got us loan approval as all the lender valuations had been "done". We pulled out. Now you can buy one of these apartments for around $350K.
Our caution revolves around an old trick, i.e. sell off the first couple of units to "silent" associates for the developer's price, thereby allowing the valuer to see "comparables" at the developer's price.
Obviously this doesn't always happen but we're just wary of it having happened in the past. I'll have to join the diplomatic corp
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Paul,
I purchased a unit off the plan back in 2005. I was the second purchaser in a building of 20. It was a purchase for my mother to live in so I really did'nt look much into it except just buy it. I paid $550K. Last week I had an Agent do a valuation for me and he came back to tell me that I paid $750K for it. I was a bit amuzed about this and asked him where he got the info from. His search showed up my price of $550K, but 2 months later it recorded another sale of my placet @ $750K. The agent told me that developers sometimes do this to beef up the prices in a building at the begining to help bring up the values. It obviously worked as my value came in at $795K. The developer ended up in liquidation so all repairs are being paid by us "The body Corp" and believe me there are heaps of repairs. I would'nt buy off the plan again — too many problems after.I would never buy off the plan. There is nothing immediately you can do to increase the equity, you just have to hope prices go up. If you buy something established that needs cosmetic work you can repaint, install new floor coverings, landscape etc and if you are savvy and do it smartly, you can add significant value to your investment in a fairly short time frame. You also have a better idea of the real value of the property.
A horror story for you – my clients purchased a 3brm beachside penthouse apartment 2.5 yrs ago in SE Qld for $2.2mil and have been trying to offload it recently and are looking at offers for $1.5 mil. If they are lucky, they may get $1.8mil. Developers promised the world and amazing values but in reality, there are still unsold units in the complex. Obviously they could have bought better, and in a better location, but there is still no immediate opportunity to create wealth from off the plan new developments.
PaulDobson wrote:I normally buy from the person that bought from the developer, as time tends to establish a real price for the property.Agree with Paul here. Buy from the person that bought off the plan, and get a discont for doing so!
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