Forum Replies Created
Wealth4life,
I think that I answered some of your questions here – https://www.propertyinvesting.com/forums/property-investing/help-needed/4322828?page=5 I believe that while it is important to consider these issues we must also be carefull that we don't create undue fear and in so doing help creat a self fulfilling prophecy. I was around during the recession that we had to have and from my observation, and to put ir in rather crass terms – the rich got richer and the poor learnt to survive, but life went on. Now, I don't wish bankruptcy on anyone however no one has forced them to over extend themselves.
As to Developers doing it tough. All I can add is not in Brisbane. We have a problem with virtually no small rise development at all and most of the bigger complexes seem to be doing ok.
Good luck on the offer of the one bedroom at $280K. I calculate that depending on your taxable income the short fall should be around $80 a week. From my observation, that's got to be a good deal. I also believe you are right about the area, provided that there is demand for rentals then it seems ok. On the other hand you should bare in mind that if the Developer drops the sale price, and 300 properties hit the market at the same time it may have a downward effect on rentals as well.
Jon
Not sure which state you live in but there is a substantial two story house being built with Hebel block in Ryan Street West End Qld. I have seen several projects using both sheet and block form and have been impressed with the finish achieved.
Tammys comment od denting I suspect would depend upon what type of render was used as a finisher. There was a town house development in Annerley done by Southside Villa Constructions who used a two pack resin finish not dissimilar to granosite that was as hard as nails and looked fantastic.
Jon
Maximum, A word of advice if you wish to be a serious investor. Go out and find a Broker, someone who you can relate to, tell them your dreams and get them to gather all of the information that they will require in order to calculate your borrowing capacity. What ever the figure is, is what it is, and you must then look for property that is in that price range. This will stop the frustration that you appear to be suffering at the moment. Don't get tied up in this particular property – there will always be a better one.
Jon
While I have to agree that property price increases that we are seeing at present are not sustainable and their will have to be a correction some time in the future, it won’t be the first time and it won’t be the end of the world. We saw it in the mid 80’s with the recession we had to have where property values dropped by almost 30% and interest rates were nudging 20%, we saw it again in the mid 90,s where supply exceeded demand for a short time and you could not give your property away ( the margin at this time appeared to be around 10% drop), there was a short period in 2003 where we had buyer reluctance and prices settled a little and while we are still getting strong growth today (around 10%), it’s nothing like the 20 and 30% we saw for those few years in the early 00’s.
People who are reading this thread need to decide if they want to be a holder or a trader, neither option is better than the other, they are just different options. I would suggest that the main difference between the two options is Time. You need to be able to spend a lot of time looking, studying, understanding, negotiating and educating yourself to be a trader, but most people have seen the growth in their own PPOR’s to understand that if they buy and hold their investment will surely grow. So for the casual investor who has a life apart from investing, buying and holding is the best option.
While I appreciate Foundations dedication to research and statistics, I would suggest that people don’t suffer paralysis from analysis. The profit in an investment is not made in the purchase it is made in the sale. The real issue is not over extending on the short fall of your investments.
Jon
Wewaz, I wrote a post on this topic on this thread here which should cover the questions. https://www.propertyinvesting.com/forums/property-investing/help-needed/4323410
On the issue of what the offer is written on, I would reccomend that you use the correct contract forms that are available on line to anyone. These forms are not weighted to either side in particular. As a legal point, I did hear of a case where an offer written on a table napkin and signed by both parties was upheld in court to be a binding agreement – but who wants to take the risk.
Jon
James, both Linar and Trakka have given excellent replies. You really need to make a decision as to if you want the property or not.. Just to clarify Trakkas comments on 'Contract Date', The contract is dated by the Agent only after all parties (that is Seller and Buyer) have agreed to all negotiable issues and conditions and have initialled all alterations. In James instant the date is in relation to a condition and you can't have an open ended condition.
Jon
Wow! Foundations calculations graphs and information just about had me heading for the Gateway Bridge to take a jump.
Michael Yardneys statement:-
And despite all the arguments to the contrary of why it can' happen and how simplistic my argument is, a recent study by Massy University in NZ showed that since 1920 Australian property has returned an average of about 15% per annum – made up of capital growth and rental return.
:- got me thinking, so I did a little calculating of my own, Now I know that I'm not up to Foundations standards and I understand that one suburb does not a winter make – however when I began selling in 1980, I was selling brand new spec homes in Capalaba (an outer suburb of Brisbane located in the Redlands some 20k from the City) for $35,000. Now if you compound this out at 10% per annum (thats 15 – 5 for rent = 10) for 28 years you get $458,849 which if you go to Real Estate.com you will see is almost exactly what you have to pay for a reasonable second hand home in the area. New houses are listed in the mid $500's. I feel a little bit better now and have parked the car back in the garage.Jon
Hi BRC, I find your comments – There clearly isn't enough properties in places where people want to live. This is because the state governments have a monopoly on handing out licesnses to build a residence. Monopoly = shortage to keep prices up. Everyone is in on the game, including the developers who own large tracts of lands and drip feed them to keep prices high. very interesting. Are you saying that there is a conspiracy theory involved here, if so I would like to know more. I also find it interesting that you hold Developers to blame. From what I read into your comment, you believe that the Developers who do hold large tracts of land should go out and develope all of it so that Supply exceeds Demand and thus reduces the value, which would be great if you were a Buyer but financial suicide for the Development Company. But then I guess you dont care how much they loose as long as it's not yours.]
From my experience with Developers, most of them work on very slim margins considering the risk. I do however subscribe to your belief that Governments and Councils have a lot to answer to. When I began selling Development Sites in the early 90's we could obtain a DA approval in 90 days, these same approvals now take two years and cost many thousands of Dollars. If thats progress, we really need to look at who our Councils are employing in the Town Planning Department.
Jon
Hi Rob, I don't profess to know all of the methods of Offer, however I am aware that in NSW the contracts are drawn up by the Solicitors, and Buyers stand the risk of being gerzumped while the Solicitor gets around to preparing the contracts for signing. From my understanding in property transactions a verbal offer and acceptance are not binding untill the contract is signed and just like in Auctions, once a price has been accepted verbally there is often another Buyer who will pay that little bit more in order to secure the property.
The best help I can give is to set out the issues that you should consider in your offer. The only point that I will add is that the cleaner you make the offer the better the cahnce you will have of securing the property. The main issues will be:-
Subject to finance The time frame for this clause will depend on wether or not you have spoken to your broker or lender before attempting to purchase (amazing just how many people haven't). The normal term for this is 14 days. (p.s. There seems to be a trend for lenders to demand 21 days for this which in my opinion is wrong because if they are given 21 days they will take 21 days. I preferr to advise 14 days and discuss extensions if they are rquired. There are other reasons for this but I won't go into them at this point)
Purchase Price This is the amount that you wish to offer for the property.
Amount of Deposit While there is no standard amount for the deposit it is generally accepted that it be somewhere between 5% and 10%. It is illegal for an Agent to accept more than 10%. Agin, this is a contentious point for many on this site as a lot of Investors are borrowing 105% of the purchase price and in point of fact many don't have any spare money lying around doing nothing. The time frame for the payment of the deposit can be, on signing or on a given time after the acceptance of the offer
Building and Pest inspections If the property is brand new, you have to ask yourself if these are worth spending the money on, however if the property is second hand then these are important for your protection on 'issues previously unseen'. Again there seems to be a trend by some people to obtain a building and pest inspection and then use it as a tool to re-negotiate the purchase price. If you are re-negotiating for something previously unseen, I have no problem with this, however, I do have a problem with the people who add up all of the things that the inspector has found and subtract them from the offer price. (as an example of this, most Inspectors are obliged to advise that the 40 year old iron roof will require replacement soon (this is to cover their public liability insurance) noe the Buyer has already seen the roof and the price has been set with this age in mind, so why should the Buyer expect a reduction?Body Corporate Disclosure Statement If purchasing a property in a Community Title Scheme (and I'm not sure how this is handled in NSW) in QLD the Seller has an obligation to provide a full disclsure on matters pertaining to the Scheme that would effect the decision process of the Buyer.
Settlement Date This is the date you wish to complete the sale. Normally 30 days from contract date, but negotiable
Posession This can be a touchy one. If the property is Tenanted and you wish to move in yourself, you may desire to have
'vacant posession' . The Seller can only give this if there is no current lease in place and they will require to give the Tenant 30 days notice. This will effect the settlement date on a 30 day contract as obviously there is not enough time to give the notice as the Seller is not likely to give it untill the contract becomes (that is your finance and other conditions are met)Other conditions There are a miriod of other conditions that can be attached to a contract, suffice to say that as I mentioned previously, the cleaner the contract the better the chance of acceptance.
Good luck in your offer, I hope this helps a little.
Jon
Rob, what State do you live in? This will have a bearing on the answer given as not all states operate under the same guidelines when offering on a property.
Jon
A very good reply Marc, and I would agree with the obtaining of a report of similar sold properties in the area. Often serviced apartments or Hotel rooms look good at face value and more ofen than not the rent return is somewhere between 8 and 10 percent. This is perhaps ok if you just want to park some cash somewhere at retirement and live off the rental income while maintaining your asset value, but as an investment looking for capital growth, they are very dissapointing and I have to say very difficult to sell. The main problem being that as the first purchaser buys them on a rate of return, unless the rents rise significantly then there is no rise in sale value because the new buyer wants a similar rate of return to the seller.
Jon
Hi Wewaz,
Life is a two way street, unfortunately most people can only see the way they are travelling and are only interested in their own benefits. Your question – Let's say a verbal offer is made, accepted by the vendor and there is no follow through to sign the contract. What is the loss to the vendor.? is a good one, and as you rightly say, there is little loss to the Seller except perhaps dissapointment and maybe a little time. I also agree that every offer should be taken seriously and from my point of view they are – but in writing.
It is not hard to believe that the major problem facing Sales People, Tradies, Property Managers, Lawyers and indeed anyone who is offering a service today is a lack of trust from the end user, when it comes to property transactions that lack of trust comes from both sides (the Buyer and the Seller). If an agent continues to give verbal offers to a Seller (and lets understand that most verbal offers are going to be low ones) the suspicion from the Sellers point of view is that the agent is only giving low offers in order to get the price of their property down. They can't see the Seller, they only hear the verbal where as if I put a written offer in front of them it becomes more transparent. I hope this helps to clarify why written is best.As to your point in relation to the Statutory 5 day cooling off period, it is interesting to note that the .25% of the selling price termination penalty for using this condition was placed by the Government in order to stop unscrupulous Buyers from running around and placing offers on multiple properties and then later making up their minds as to which one they wanted to keep.
Jon
Hi James,
As the contract was altered after you signed it, it is no longer binding, only you can make it so by initialling the alteration and accepting the condition. You must decide if you still want the property and if you do, I would advise that you perhaps renegotiate the date for the Building Inspection to your and the Sellers satisfaction. In my opinion at this point in time, you don't have an enforcable contract.
I understand how difficult it was over the Christmas period to sort out times, but the clause must still have an end date. Perhaps it would have been prudent to word the clause in such a way as to allow for extension to the condition should you not be able to complete by the due date.
Jon
Some agents will in fact take verbal offers on property, however good agents have more than likely learnt that it is not in the best interest of the Seller to do so. Most agents have learnt along the way that verbal offers that are accepted are more often than not never converted to contracts. The reason is that the Buyer generally thinks that if the offer is accepted, they have offered too much.
The act of putting the offer in contract form does in fact increase the chances of the offer being taken seriously, but it must also be taken in contex with the conditions that are included. When buying a property it would be worth your while to consider what you would accept if the property was yours. For instance, if the property was listed at a reasonable price of $400,000 would you go in with an offer of $300,000 subject to finance 21 days, subject to Building and Pest 21 days, subject to you changing your mind within 21 days and on a 90 day settlement with $1000.00 deposit. My guess is that neither the Seller nor tha Agent is going to treat this offer with any seriousness.
On the issue of low deposits, there is nothing in law to say how much a deposit should be (except at Auctions where it is specified) and I agree that when push comes to shove, I have taken low deposits (funnily enough, these contracts are usually the ones we have the most trouble with at settlement). The thing to keep in mind is that if I have two or more offers on a property, I will advise the Seller to accept the one with the largets deposit given that price and all other conditions are similar. So the moral is doen't get to cocky or it could cost you. Another interesting point here is that this low deposit syndrome only comes from Investors who are borrowing cost plus in order to purchase the property. Owner occupiers understand that the deposit forms part of the purchase price and are more often than not happy to show commitment by giving 10% deposit.
Jon
James007. There are two issues relating to your post. The first is one of legality on the Agent adding a date post signing by you as the Buyer. One question that I would ask is. Was it done when the Seller signed the contract? If so it is a counter offer and will require an initial of acceptance by yourself to ratify the alteration. However if it was indeed done after the signing by both parties, then the Agent is at risk.
In saying all of that, I would bring your attention to the fact that no Solicitor worth his salt would ever draw up a condition without a 'due by date'. The reality is that if there is no due by date on the contract, you don't have to advise acceptance or rejection right up to settlement date, so the Seller doesn't know if he has sold or not.
Jon
Hi Alwayzlearning,
This procedure is common practice and while Council can inforce the issue they are too gutless to do so. You will end up with a drainage easement on your boundary not unlike any other drainage easement. Provided that you take reasonable steps to ensure that the Developer does the work in a professional manner and leaves the landscaping as he found it, I see no problems. Perhaps a legal document is not a bad idea and all costs should be paid by the Developer.
I always advise people to put themselves in the other persons shoes and ask if you were the one wanting to put a drainage pipe (to get rid of run of water) down your own side boundary, would you do it?
Jon
Hi Perry,
There is an explanation for your statement:-
The agents regularly say that this place or that place is underrented and therefore upon settlment you could increase it by a substantial amount to make it more affordable,I see this occurence on a regular basis when selling Tenanted properties and it is one of those aspects that as a buyer you need to be aware of. Reading between the lines in your comments, your major concern seems to be the short fall on income over expenditure because you are borrowing the whole amount of the investment property. Believe me, this is the same for most investors. There next greatest fear is that the property is going to be vacant for a long period of time, hence there is often a reluctance on the Invvestors part to increase rents to the correct degree.
An example of this would be. An Investor purchases a property for $300,000 and over a period of five years the rents increase from $280 per week to say $350 per week, he then decides to sell the property for the current value of $400,000 and wonders why the investors are not interested (oh! and by the way, just prior to the investor listing the property he re-signs the Tenants on a twelve month lease)
Apart from having a good understanding on property values, you also need to have a good understanding on rental returns and the demand in the area that you are looking.
Jon
s,r,prop,
Well said and explained. So many people seem to think that the councils and the developers are conspiring against them, when in reality it is so difficutl to get a DA that works to everyones satisfaction.
Jon
JD, JD, Where do I start. I did advise that I didn’t have all of the answers to your questions, in particular the one that you seem determined to find an answer to. How do we stop progress?
The history lesson was my pleasure, here is another one for you but this is on economics. The size of the town has nothing to do with my earlier comments, the problems associated with housing stay the same there just bigger numbers.
You mention that your little town has a population of just over 20,000 and then you go on to advise that your town is doing its bit for Australia’s population growth by providing a further 13,500 new houses. If you multiply 13,500 by the national housing average of 2.3 it means that your little town is going to have a further 31,050 residents in the not to distant future. By my calculations this has just doubled the size of your town – it will never be the same again. As each of these new families have children and grow the whole cycle starts again. More demand equals more supply. Before someone talks about how big our sunburnt country is and asks why don’t we just spread out and all have quarter acre blocks, spare a thought for infrastructure and the cost of maintaining a decentralised community.
JD you are welcome to dream about being a white night and charging down the street in an attempt to hold back development, but I feel that I have you pegged with your statement:-
I am only interested in what is over my back and side fence and the rest of our small suburb.
Good luck with your efforts, I hope that all works out well in the future. Might I suggest that when you are walking the streets talking to all of the locals, that you attempt to build a ‘save the suburb from the developers fund’ so that you can put up the bonds for the objections if they go to court. This will also show just how many residents are committed to fight the good fight – signatures are cheap.
Jon
Hi JD,
Let me start by saying that I don’t have the answers to your questions and while I do have a degree of empathy for your situation, I believe that it is poor form to blame the Developers for the problem.
The beginning of the problem arose when our forefathers and Town planners began to plan our Cities with next to no foresight for the future growth and development of our fine Country. This was followed by a continuous population explosion year after year. Industries set up in all major cities and centres which required a work force which in return required housing and set in motion the great Australian dream to own our own home. In these early years it was not uncommon for a family to have 6 to 8 children and thus have a demand for larger properties (room to move). Ironically if we were to look back at the norm, many of these Australian families were content to live in houses that were not much bigger than 12 squares. Today our family figures are down to 2..3 children and we couldn’t possibly live in a house any less than 24 squares. Go figure.
With our population around the 20 million mark, the real question is what will it be like when it reaches 40 million? Another factor that must be taken into consideration is the growing number of single person households which is set to exceeded families in the foreseeable future. This trend is what creates the demand and thus come in the Developers to satisfy this demand. Perhaps if enough people do not wish this change they should get married younger have larger families and create the demand for larger blocks with smaller houses and get the developers to produce them???
The way I see it, progress is inevitable and we have the choice to accept it or pack up and move on. By far the bigger problem as I see it is Councils absolute stupidity as to their guidelines as to what can be done in the form of development. Believe me, from my experience Developers would like to produce a far better product than they are forced to by Council ineptness.
In Queensland in the late 90’s there was a huge push from our City Council to reduce density in the inner Suburbs and in a very short time I witnessed DA’s (development approvals) go from 3 months to 2 years. Guess what this did? Increased costs and reduced the value of development land.
As I said in the beginning, I probably wouldn’t answer your questions to your satisfaction or have the right answer for you. I will however advise that you do not become a NIMBY. These are people who understand that we have to do something in the way of affordable housing for our children just as long as it is Not In My Back Yard.
Jon
