House and Land package with 600+ sqm land??

Benny wrote:

Hi Steven,
The difference is that the place is newly-developed, in an area of (likely) low-cost new houses. It is likely to an “outer fringes” property and surrounded by similar new houses. Since it is a larger block, it could be that they got the land really cheap (what was its past history??? not an ex dump I hope) and the developers are hoping the larger land adds an appeal to a home-buyer who wants a backyard for the kids.
Since it is a “solution property”, (i.e. brand-new) there is no meat on the bone for you. You can’t add any value by fixing anything. In fact, it is likely to be selling at an above-the-median price – making YOU the meat on THEIR bone if you buy it. ;)
Benny
PS These can be a way in for FHB’s – but any value gains are likely to be ten years away – over time, it becomes “just another suburb” with values reflecting its appeal at that time.

Hi Benny.

Yea, in fact, the only difference I can find is one is new and the other is second hand or something like that, as well as they do get the option to build say a granny flat (since they do have the size of land) if required compare to those H&L with only 300 sqm of land… so probably slightly “better” in this regard.

But still, I got my first hand experience when buying my own home just a few weeks ago. Scenario like this. Basically to prove buy existing + do my own cosmetic makeover = more profitable than buy new.

1. Area where most 4 bedroom house (with 600+ sqm land) cost 1.25-1.35M if second hand… up to 1.7 if brand new.
5. Vendor was motivated to sell their 5 bedroom property (with 650 sqm land) because they need to move close to where their daughter live due to daughter giving birth soon (Chinese family, so you know they rely on old folks in this regard a fair bit).
3. Some appliances in kitchen, while in workable condition, are best replaced.
4. Vendor pricing range put down as 1.15-1.25M
5. We offered 1.18 and got it. While still expensive area to live in, but people think relatively speaking we got a good buy as we bought for 100K lower than average price in that area.
6. We replaced Cooker, Sink and Dish Washer. Total cost of buying the new equipment + installation fee = less than $3000. Otherwise nothing else was replaced in the kitchen as it only needed some minor cosmetic makeover, nothing serious that needs repairing. So costed us about $0 for that and just an afternoon of cleaning time really….. We figured if vendor replaced those appliances on their own and did their own cosmetic makeover prior to selling, they’d probably charge 20K-30K or so on top of the existing price. (renovation in Melbourne is expensive now days)
7. My family took up 3 bedrooms, and with 2 spared bedrooms sitting there doing nothing, we advertized in a university that is 2 suburbs away from us and got 2 students living with us in a boarding scenario…. helps us to pay down the loan as well.

Thanks Benny.

The part about having extra income is not really the main point though.

The important lesson I was hoping to reinforce — via my own experience — is that it is better to buy something that is already established and second hand, and do some minor cosmetic makeover, rather than buying something that is brand new.

Of course, don’t go out of the way to buy a property that suffers from structure problems, as that would cost too much and take too much time to fix. But if we can buy something that only requires some minor cosmetic makeover, it is generally a good buy.

Unless there are some very special circumstances, otherwise if a problem has some cosmetic problem, that actually gives us as buyer some leverage to negotiate the price, and usually it is much cheaper for me to buy that property with some minor cosmetic issues and then I fix them up, than buying a brand new one (vendor will certain try to charge me premium price if I buy brand new).

I used to have a difficult time understanding this concept, but by going through that experience, I now fully support this approach.

Benny wrote:

Hi Steven,

The important lesson I was hoping to reinforce — via my own experience — is that it is better to buy something that is already established and second hand, and do some minor cosmetic makeover, rather than buying something that is brand new.

You said it – and I can think of a number of ways this is true. Can you add to my list?
1. A seller of a new H&L property is less likely to budge on the price they will take – so, no discount when buying
2. A buyer can have rose-coloured glasses on when inspecting a brand new house, thus having their emotions lead them toward buying THAT one (even if their head is saying “Wait up a bit!”)
3. A buyer expects to find things “not right” in a second-hand house, and their psyche is ready to accept that (and negotiate the price down) if deemed to be easily fixed.
4. An established suburb already has a “history” that can be accessed – i.e. you already KNOW this suburb is deemed to be “good value” before you buy. Not so with H&L (if in a new estate, as most are).
5. No (or few) “points of difference” between one H&L house and the next one – everything available is pretty much “same same”. Not so with second-hand houses in established suburbs.
Steven, I’m sure you will have found more things too that have led you to your conclusion. Go ahead and list them – and others too – jump in with your thoughts, as they all help,
Benny

I will add one to that list:

Houses that are built as “brand new” are not necessarily built using the best materials and products either.

For example, if I build a brand new home for myself, I’d choose the best quality products. But if I only “build a new home so I can sell it”, I will use the cheapest materials and what not.

While I myself have not seen it, but my parents have come across that before. My mom said a while ago one of the properties near her house was erected, and she knew the property was meant to be sold for profit rather than for owner to live in. She saw it with her own eyes that the builder used cheap materials. In particular, she noticed than when building the roof, the builder used those very thing wood rather than the thick ones.

The result is that within less than 1 year, the person who purchased that property already had to climb up the roof to fix small bits here and there multiple times. Not very pleasant experience for that buyer.