I was wondering what people think of my situation?
I invested in a property two and a half years ago on an investment property off the plan ($540k). Yes I was a
sucker, no stamp duty and a rental guaranty for two years. Judging by the
drawing and photos I thought great, just a $2000 initial bond and wait until
settlement. Plenty of time to save and let the market rise.After two and a half years the property settled, developers paid the stamp duty as agreed in
the contract, but when it came to the rental guarantee.. they are planning to go
bankrupt. We can't win because it will take more money to take them to court.
Now the banks still require their monthly interest paid and theres a number of
apartments wanting to be rented. The banks have under priced the property, and
we agreed on a price, not knowing, that was over inflated at the
time.Now I have to sell at the risk of hoping to get the price that I
need so to pay the bank loan off and get my 20% bond back. Who's to blame myself
and the realestate agent who sucked me in. I still can't find anything about the
developers. Everone was in on it from the agents, finance company, strata
managers, settlement agents. They all make their commissions and move on to the
next scam.Hmmmm, I have heard stories like this before. It is very important to do your due diligance before purchasing properties off the plan- developers such as these people have given the industry a bad reputation. I suppose you can just count this as a leson learned (an expensive one at that)!
I think the most important thing in property investing is making sure you are not paying too much. If you pay over market value, you are always going to lose no matter what or where you buy.
Cheers,
LukeThanks Luke,
I tried to do at best my due diligence. Unfortunately all parties concerned did not want to disclose the builders/property developers
information.
Glenndeveloper’s name would have been on the contract. Builder would have had their signboard up showing their licence number. Council could advise there.
As for price, you take a punt, crystal balling it hoping for a stag profit.
I would resent the whole thing being called a scam.
The real estate agent did his job, which was to market the property effectively to obtain best possible price from the public.
The developer provided drawn up plans at great expense from his own pocket showing what the property would be looking like when built. He also would have had the property passed through council .. which takes a couple of months.
Local Council would have vetted the development and made sure that it fitted in with their specifications for apartments in the area.
The banks provided the assurity to get the whole situation going as long as he met his 'sign-up' quota.
Seems the only person who didnt do their due dilligence was … the purchaser of the property????
I am always confounded by people who head into the property market with blinkers on and hope that the damage they cause themselves financially isnt life threatening. You had plans for the property concerned. Now … the only reason that a property would be not renting easily is if .. IT WAS A BAD PROPOSITION to start with !!!!!
There really are developers who are prepared to maxx out a property with itty bitty apartments with top gloss finishes that really no-one wants to live in. They do 2 bedroom apartments that are really tiny (does 62m2 sound tiny to you) and expect people to buy on the basis that 'they are a good investment'. Would you buy junk furniture for your house? Would you buy a 40 yr old Ford with 300k on the clock? …. no .. ? Then why would you buy a unit thats overpriced and undersized?
For future reference … these are the sizes to look for .. and any less .. dont bother with them.
A good studio should be 40m2 .. A good 1br should be 55m2 … A good 2br should be between 70-85m2
A good block of land should be 600m2 if its full .. and at least 340m2 if half … and it should be square if possible.
A bedroom should be close enough to 4 foot by 4 foot roughly .. have inbuilts that dont intrude on that space .. and a window.You've bought an issue .. now the best thing i can suggest is .. do what most people do with an issue .. hold on and hope for it to get better .. or cut your losses while possible. As far as renting goes .. if you are having an issue .. get someone in .. at any price. The breathing space you'll have on your bill payments will reduce your stress levels.
Just for reference .. the only time i will purchase off the plans is when the builder has had several successful projects and .. i'm aware of the market swinging upwards anyway. Otherwise I prefer the old see feel and touch for property. And i'm prepared to pay the stamp duty for that privelege.
xdrew “4 foot * 4 foot bedrooms” = anticipation for midgets?
Scott No Mates wrote:xdrew "4 foot * 4 foot bedrooms" = anticipation for midgets?Hahaha .. sorry.
Try metres instead.
I appreciate all your comments, especially xdrew you are definately right about the time, effort, cost and know how involved in building projects.
I tried to find out the credibility of the buiding company, i know now that they must have been small and did not have the capital base, because the real estate agents would have used it as a merketing reference if they were of some size and had a track record of other completed projects.
Having said this, I thought by having the rental gurantee written in the contract would have ment some asurety.
Someone mentioned that they can do this in every state. Setup shop with a new business name and acn no. and do the whole scam again. I've seen adds in the Perth WA newspaper of off the plan apartment with a two year rental gurantee advertised.
Rental guarantees should be avoided. If it is a good investment, you wont need a rental guarantee to achieve a good rent. If you are getting a rental guarantee, then the developer is taking on risk and so he will increase the price of the apartment to cover the cost of the risk of the rental guarantee. Nothing comes for free.
Luke
luke86 wrote:Rental guarantees should be avoided. If it is a good investment, you wont need a rental guarantee to achieve a good rent. If you are getting a rental guarantee, then the developer is taking on risk and so he will increase the price of the apartment to cover the cost of the risk of the rental guarantee. Nothing comes for free.Luke
Good advice. Rental demand should be part of the due diligence process – if you’re not confident that you can secure and hold tenants without a guarantee than it’s probably not an ideal investment.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
I second Luke and Jamie's comments on rental guarantee's.
These costs are always built into the property in some way. I was offered recently a developer property that had $50k (yes you read it right) commision in it and a rental guarantee.The only way to have the ability to fund this is to build it into the price.
glennt wrote:Someone mentioned that they can do this in every state. Setup shop with a new business name and acn no. and do the whole scam again. I've seen adds in the Perth WA newspaper of off the plan apartment with a two year rental gurantee advertised.
Sorry to hear of your disappointing outcome Glenn. It's probably not a "scam" though. If the developer has gone broke then they would have lost on the deal too. It wouldn't have been their master evil plan to go to the trouble of building the development and then file for bankruptcy just so they can get out of some measly rental guarantees. The developer would be licking their wounds too and is very unlikely to be looking to move states and do it all over again just to go broke a second time.
Thanks for your comments.
I am angry and am trying to seek some answer or to blame some one. Obviously it's going to cost me money to sell and try to recoup my money. I still think that when these developers were chosen or allowed to develop the property a reasonable duty of care should have been made to maker sure they can fulfill the whole contract. Another words thay had sufficient underlying funds or capital to draw on.
Dear Glent,
If you’re reading this, I hope everything turned out well.
Perhaps, what you need to do is to contact some very creative people here,
Until you’ve spoken to them, don’t make any hasty decision.
Check your private messages, it’s possible someone’s tried to contact you already.
Angelina
If you need a rental guarantee to buy an IP then don't bloody do it! Even Defense Housing Australia (DHA) will give you a rental guarantee BUT you have to pay around an annual 17% Management Fee! You see, if YOU MUST have a rental guarantee then YOU WILL pay for that guarantee somewhere.
I repeat, if you are new to property investing and are either offered a rental guarantee OR feel you must have one then I humbly suggest you consider investing in Pine Plantations, Aloe Vera Farms, Worm Farms or Lotto Tickets – NO-ONE GETS A FREE RIDE FOLKS!
Hi Glenn
I guess ultimately you'll have to put it down to "the cost of your education". Bet you do your due diligence in future and hopefully you'll do a bit of strategic reading. If you haven't read it already, for starters, I'd recommend Rich Dad Poor Dad.
But enough "tut, tut, tutting", what you need now is to try to move forward with this property without losing your shirt. One option may be to sell it with vendor finance. Selling this way has a reasonable chance of getting a good price for the property and turning it around so it creates positive cash flow.
As this is one strategy that may get you out of this bind, some good introductory material on the subject can be found at:
https://www.propertyinvesting.com/strategies/wraps
https://www.propertyinvesting.com/strategies/lease-options
http://www.jvpropertypartners.com.au/index.php?option=com_content&view=article&id=50&Itemid=75
http://www.vendorfinancelawyer.com.au/
http://www.vendorfinance.asn.au/ The Vendor Finance Association of Australia
http://www.vendorfinanceinstitute.com.au
Cheers, PaulPaul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi All,
Glen, Paul is right. I urge you to contact the creative people here before doing anything you’d be sorry for.
I agree that “tut, tutting” doesn’t help Glen in his current predicament. All we can do is try and help, either by encouraging him or offering a solution. He already knows he’s made a mistake. Pointing it out more doesn’t give him any hope.
I just feel a lot of newbies can find lessons in this thread (even experienced investors, too). We learn from mistakes, even other peoples. I’d be the first to tell of my horrible mistakes (more of that in another thread).
This is really a cautionary tale for all of us.
Glen, please let us know how you are treading. As fellow investors, none of us… absolutely… none of us takes any pleasure in someone’s heart and headache.
Take care,
Angel
Thanks for all your comments. For some time no one made any comments, I started to think my situation was falling on deaf ears. Your comments have been some help and assurance. You have given me food for thought and will look into some of your ideas.
Currently it's on the market for sale, and back on the rental market as well. If it was rented out then it will cover two thirds of the mortgage. Presently it's costing three time as much as my PPOR.
Glenn
Hi Glenn
Just in case you think I'm suggesting something new and "out there", this link may help:
http://www.jvpropertypartners.com.au/index.php?option=com_content&view=article&id=50&Itemid=75Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
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