All Topics / General Property / Off the plan purchase

Viewing 18 posts - 1 through 18 (of 18 total)
  • Profile photo of budgie_boibudgie_boi
    Participant
    @budgie_boi
    Join Date: 2003
    Post Count: 4

    Hi guys,

    We’re about to exchange contracts on an off the plan apartment in Brisbane. I’ve noticed some people here express negative views about purchasing property this way.

    I was wondering if anyone had any advice on the possible pitfalls with this kind of purchase and anything we should look out for.

    Thanks!

    Profile photo of xyzzyxyzzy
    Participant
    @xyzzy
    Join Date: 2003
    Post Count: 178

    “I was wondering if anyone had any advice on the possible pitfalls with this kind of purchase and anything we should look out for”

    That the numbers stack up and that there are no little fibbies in the deal!

    Profile photo of SooshieSooshie
    Member
    @sooshie
    Join Date: 2002
    Post Count: 974

    Hiya,

    Scroll through the posts at these links

    https://www.propertyinvesting.com/forum/topic.asp?TOPIC_ID=772

    https://www.propertyinvesting.com/forum/topic.asp?TOPIC_ID=961

    Why do you want to buy off the plan now, in an overheated market?
    Whose the company who’s marketting/selling the property?
    What do you know of the builder’s/developers prior work?
    Do they have a rental guarentee?

    Umm the questions can continue…

    What is your stratergy with this property? On sell at completion?

    Cheers
    Sooshie [:)]

    When a problem is created the solution is created simultaneously

    Profile photo of budgie_boibudgie_boi
    Participant
    @budgie_boi
    Join Date: 2003
    Post Count: 4

    Some more info on the purchase….

    2 bed, 2 bath + study in woolongabba.

    Company marketing the project is Property Direct (if anyone has any comments on this organisiation would be appreciated…)

    There is no rental guarantee, and we are planning on keeping the property for the hoped-for capital growth.

    We have two main reasons for buying off the plan now. First, all indicators are that Brisbane is in under-supply and will remain so for some time, and secondly, we don’t have the equity to purchase now, so we figured using a deposit bond to purchase a property now that won’t settle for approx. two years was the way to go.

    Profile photo of stargazerstargazer
    Participant
    @stargazer
    Join Date: 2002
    Post Count: 344

    Hi Budgie boi

    how are you structured for the term of construction.

    Ensure that a specific time frame is stated and if delays occur that the developer picks up the tab. This is from experience.

    Bought off the plan. timeframe 6 months.

    delays
    weather conditions
    industrial action
    supply shortages
    supply delay
    approvals delay etc

    so what was a 6 month expectation turned out to be 18 months. NO RENTAL INCOME.

    Just try and forsee the downside then be covered within your contract.

    regards
    alf

    Profile photo of melbearmelbear
    Member
    @melbear
    Join Date: 2003
    Post Count: 2,429

    But alf, surely if the property was not completed, you hadn’t paid for it, and therefore there were no interest costs, so it didn’t matter if it was complete or not?

    I know with some of our OTP purchases 2 years ago, we were cheering when there were delays, as we had a locked in price to purchase, values were rising all the time, and we had not had to pay any money (other than our deposit which was in cash, as we weren’t organised enough to have Dep Bond or Bank Guarantee).

    Cheers
    Mel

    Profile photo of wizzzardwizzzard
    Member
    @wizzzard
    Join Date: 2003
    Post Count: 11

    I am reminded of a phrase used by Paul Clitheroe —

    If you cant afford it, you cant afford it.

    What is wrong with the old fashioned way of SAVING for a deposit and then seeing what you can get for your money???

    I know it sounds harsh, but it seems like you are not ‘investing’ rather, you are ‘gambling’ with Capital Growth. If there is no growth and limited prospect to sell, you may end up paying money back for an investment that will not be returned to you for a very long time!

    I dont know about most people, but I like to get money back from day one of my investments.

    Profile photo of stargazerstargazer
    Participant
    @stargazer
    Join Date: 2002
    Post Count: 344

    Hi Melbear

    Well i wish

    We ahd gone to an property investment advisor and paid him significant dollars and he was looking over things. I recall asking him is there any risk to this his reply:

    “I wouldn’t want you to lose any sleep at night”

    What was set up were progressive payments so the bank would release funds at certain stages of the project. Whe the second or third stage came along we had to commit the payments of the funds released. He had sated that the 221d component would fix this. Yeah right.

    Well it was due to inexperience and thinking that because you pay someone they will do the right thing by you.

    I would never do it again that way. After the fourth stage we were fully exposed to the loan and there were delays to the practical completion stage. Fixed interest rate for one year expired and rates had climbed to 8% at the time.

    I did lose some sleep

    regards
    alf

    Profile photo of melbearmelbear
    Member
    @melbear
    Join Date: 2003
    Post Count: 2,429

    alf – bugger! Does sound like you were taken for a ride.[:(]

    budgie_boi, I suggest you do a heap of research on the area, see how many units are being built, what the rental rate is (from other agents other than you’re buying from), what other agents think the places are worth, and will be worth by the time they are completed etc. etc.

    Get yourself a valuation now (independent) to see if you are paying today’s price, or the future price. A lot of developers are greedy, and charge next years price, which in a falling market, could be the price in about 5 years time.

    Also, make sure that you do not release your deposit to the developer. If they want that, and won’t accept not having it, walk away. If things go bad, your money is gone.

    Cheers
    Mel

    Profile photo of stargazerstargazer
    Participant
    @stargazer
    Join Date: 2002
    Post Count: 344

    Hi Melbear

    Yes it was a bugger but i learnt alot and luckily the property has risen in value.

    My main thing at the moment is loan structure and whats the most appropriate.

    The variable/fixed argument is just as bad as the sell/dont sell.

    You got any opinion on this you seem pretty shrewd with the figures side of things.

    cheers
    alf

    Profile photo of melbearmelbear
    Member
    @melbear
    Join Date: 2003
    Post Count: 2,429

    Hey alf, I too have had some of those ‘learning experiences’ that come straight out of your wallet.

    If you are concerned about rising interest rates and all other factors you mentioned, consider fixing at least part of your loan. This way you have a foot in both camps. On one hand, you KNOW how much your repayment is for, say 75% of your loan, and on the other 25%, you could make extra payments, have a redraw facility etc. etc.

    If you are looking to reduce the loan, then a good rule of thumb is to fix the 75% for as long as you think it would take to pay off the 25% (providing it’s a rate you are happy with), give or take a few months. That way, you haven’t locked in for 5 years, paid off the 25% in 2, and are stuck with being unable to pay any extra off the fixed portion.

    Hope this helps.

    Cheers
    Mel

    Profile photo of SooshieSooshie
    Member
    @sooshie
    Join Date: 2002
    Post Count: 974

    Hi BB,

    Check out this link (top paragraph)
    http://www.brisbane-australia.com/102852.php

    You could always find out if they had any links to HK [:D] (okay, bad joke, naughty sooshie! [}:)])

    Okay, so I’m sitting here, whilst Mike and little Simon are watching Pingu (Simon sicked up all over me…okay more info I know…[:P])

    Back to business… from the little research I did just now, there are a lot of property developments for sale in Brissy, what makes this one stick out from the rest ?…

    Perhaps take out a little longer on the deposit bond… Get a good solicitor to look through the contract. We had one, who did this and found some things we wouldn’t have thought to look for..

    Go in and have a look at the model of the development… ask to speak to someone at Property Direct. See how easy it is to get answers before you put up the money.

    Mike and I went and had a look at the models of the properties being developed, even though we got out of the deals later. It was an interesting experience and it taught us that our opinions didn’t matter only our money did.

    I think I’m getting brain foggy now…

    Night Night
    Soosh [|)]

    When a problem is created the solution is created simultaneously

    Profile photo of budgie_boibudgie_boi
    Participant
    @budgie_boi
    Join Date: 2003
    Post Count: 4

    Re the “if you can’t afford it you can’t afford it” comment…

    If you currently have low equity, but know that you will have a decent amount in two years, isn’t buying off the plan a good move? I mean, assuming that the price isn’t inflated, by holding a property now with a dep. bond, aren’t we effectively buying a property in 2 years at today’s price? All good in theory i know….

    In a way, I guess it’s similar to a lay-by. I cant’ afford it now, so I put down a deposit and buy it when I can afford it.

    Obviously, if the price is inflated, which many of you seem to think off the plan purchases are, then all of the above is a moot point…

    Profile photo of shaunwalkershaunwalker
    Member
    @shaunwalker
    Join Date: 2003
    Post Count: 403

    I went to the property direct intro night here in canberra a couple of weeks ago. not that i wanted anything, its just that my boss wanted to buy.
    i took a couple of their phamplets with me and from what i could tell was this:
    1. IP relied on neg gearing pos cashflow.
    2. No strata management in place, ie those numbers were’nt added in.
    3. They assured everyone that the 14 km around brissy was the place to buy due to demand.
    I asked them where they got that information from and it was a “gut feeling” from being in the game.
    (I dont know where they got that from but the RBA has said the only thing keeping the housing boom going is demand from investors.)
    4. There was no rental guarantee, so in effect they were giving numbers that they thought were right.
    5. They couldnt tell me how many developments were going up in that area, nor vacancy rates.
    Of note, was when i turned up and gave a wrong phone number so i wouldnt have to put up with the “follow up call” the buggers got my home phone number anyway.
    I’m not saying they are a bad deal, but i dont live in brissy, nor do i know the area. I’ve told my boss the same thing… so at least he’s starting to learn to think for himself and question everything “due diligence”.
    I run off the theory, that no bugger is going to make me rich, i have to do it myself, believe nothing and double check everything.
    in a rising market mistakes can be made and covered up due to capital growth. in a falling market those mistakes may eat you alive.

    Profile photo of ANUBISANUBIS
    Participant
    @anubis
    Join Date: 2003
    Post Count: 559

    Can I ask why an off the plan unit rather than an existing house. I’m biased against units personally, but I think if you are buying because you expect a capital gain in 2 years, it might not be the best idea to buy a metropoliton high density unit.

    I don’t think Brisbane is any better off than Melbourne or Sydney when it comes to over-supply. There seem to be thousands of units for sale at quite high prices. I’d be interested to know where the thousands of new tenants reqd will come from.

    My personal (remember I’m biased though) opinion would be that you may be (very) lucky to be break even with the purchase price in 2 years, never mind the actual cost of owning it if -ve geared.

    A.

    Profile photo of TruskaTruska
    Member
    @truska
    Join Date: 2003
    Post Count: 20

    Hi

    I live in inner brisbane, and on my way to work I pass 3 large unit blocks being constructed, and many just completed, with lots of for rent signs hanging off of them. There are also heaps of unit blocks nearing completion in New Farm which is comparable to Woolloongabba in distance to the City but without the “latte set”, atmosphere and facilities of New Farm. I think that in the next couple of months prices will stall and perhaps even shrink. Rents will probably also drop. I’ve noticed in my own suburb (Morningside) that there are a lot more “for rent” signs going up, and staying there for longer.

    Is the unit on the Corner of Ipswich Road and Stanley St? If so, that’s one awfully big project with lots of units to unload. I can’t comment on the set up of builders as I’ve only noticed the sign in passing.

    If I was going to buy, I would probably look at New Farm instead. Its close to The Valley and has better facilities.

    My gut feeling is not to buy “new” right now, if at all. If depreciation is not an issue, it might be a better option to wait a bit and to buy “second hand”

    Good luck sifting through everybodies info.

    T[:D]

    Profile photo of KavitaKavita
    Member
    @kavita
    Join Date: 2002
    Post Count: 45

    Hi,

    I bought off the plan about 3 years ago, just before the property boom. I have certainly made quite a handful, but it has been very stressful.

    It took the company 2.5 years to build. (I was told that it was going to take only a year -I was stupid to believe that…..my first property). As they kept to saying that the apartment was going to be completed in six months time….I couldn’t dare change my place of employment or anything else for that matter ( I wanted to go back to uni and finish my B Comm/Law – which I am finally doing next year!)

    Plus the quality of the apartment was not as good I would have hoped for! The finishing touches weren’t that great. I was very disappointed.

    However if it was for purely investment purpose, it was a damn good buy..10 min from the city centre, 2 u/g parking space and sought after area for renters. I would not buy ANY off the plan apartments/property now cus its very over rated/priced and by the time your apartment/properrt is built, the value would have gone down heaps…but thats in Canberra..

    Maybe you should check out if there are more off the plan releases in that area in the coming future or not. Have you researched the builders/company?

    Houses are better. I would personally wait for the market to cool.

    Profile photo of AdministratorAdministrator
    Keymaster
    @piadmin
    Join Date: 2013
    Post Count: 3,225

    Remember guys that sometimes a builder cannot get finance until he has sold a number of the units off the plan. This puts him under some pressure.

    If one is dealing with such a builder direct one may be able to not only get a better price but, if he is very anxious to get started with the construction, he may even be prepared to give you a contract for each of several units and at the same time he may well be prepared to put an escape clause in the contract allowing you to not proceed with the purchase unless you choose to do so.

    The fact that the builder may be hoodwinking the lender hasn’t got anything to do with you.

    The other problem of finishing up with a shabby
    building can be controlled as the contract should contain a set of standards. Have an inspection carried out by an architect and you may be able to have the builder rectify the defaults.

    Be aware that a large builder doesn’t automatically mean a good job !!

    Of course if one hasn’t got the time to make contacts with builders, well then by all means pay the higher price through an estate agent and miss out on being able to negotiate an escape clause.

    Pisces133

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