We were discussing this very subject at a Business Group function that I attended the other day and some of the reasons were certainly worth mentioning here.

When I began selling property in 1977 in an outer suburb of Brisbane (Capalaba) the average spec house was selling for around $30,000, it came as a house only, no driveway no gardens and no fences – just the house. The average size of these houses was around 10 to 12 squares.

Attending the meeting on the day we had an Architect and a Builder from one of the major franchise companies and interestingly the both agreed that if they designed or built homes under 24 to 30 squares, they would not be able to sell them.

Does this mean that the new home buyers who complain about affordability are perhaps setting their sights on too much rather than working around what they can afford? Are the local Councils and or the Developers wrong in demanding that extras like fencing and landscaping and building covenants be a necessity and not an option?

Jon

wezwaz,
I believe it will depend on which State you live in as Contracts are prepared and executed differently by State so I can't speak for all, however in Queensland you can use a Lawyer or a Conveyancer and I would suggest that you phone and obtain a few quotes for the service that they provide.   Understand that the Queensland Contracts have been written by the REIQ with advice obtained from the Law Society and as such they are fair to both parties, if anything they are weighted towards the Buyer with statutory 5 day cooling off period (in case you change your mind or feel that the agent forced or coerced you to sign the contract)

Provided that you don't sign a cash unconditional contract you are relatively safe.   This means that you need to understand such things as Subject to Finance (I advise that you speak to your lender prior to looking at property) Subject to Building and Pest Inspections and their ramifications, Settelemny dates and time required to complete. and in the case of Community Title purchases find out exactly what a Body Corporate Disclosure Statement should cover.   It is no longer Buyer beware the onus is on the Seller to disclose all defects or matters that would have a bearing on the Buyers decision process.  (As a matter of interest, I believe that houses should have to produce a disclosure statement as well )

Best I can do to help without legal jargon.

Jon

The Problem with advice, is that you have to be carefull where it comes from and what barrow that person is pushing.   We all have pre conceived ideas and most of us seem to be single minded.   From a legal perspective, obviously there are good ones and bad ones.   I have seen Lawyers kill deals by being pedantic and I have seen other Lawyers explain things in laymens terms.   Advice is still a good thing to get.   I would like to share a true story with everyone here. 

 Some months ago I listed a two bedroom townhouse and when I went around to take some photos of the property the Tenant advised that he was interested in putting an offer on the property but wanted some time to do some research.   I advised that that was fine and as it was only mid week we could have a chat after the week end open house.   After the Open house the Tenant came up to me and said that he had done his research and was ready to place an offer on the property.   His first comment was.   How did I come at the asking price of $350,000?   To which I replied that as I specialized in this type of property and had in fact sold several similar recently, I felt that I had advised the Vendor with a very realistic value.   What was the reason for his question?   To which he replied that he had paid $80.00 for a report from a company that specializes in Buyer Property Valuation reports, and according to his report the town house was only worth $300,000.   I asked if I could have a look at the report to which he agreed and sure enough the report suggested a range of $280,000 to $320,000 depending on property condition.   The Tenant had taken the middle road which in itself was fair enough.   I advised that his report was useless as the information supplied was at least three months behind time and I was confident that I would achieve the sale price for my Vendor and that he should rethink his offer.   Long and short of story, the property sold to the first open house visitor and for very close to full price.   I think that the Tenant is still paying $80 for someone to give him advice and last I heard he was still looking.

Jon

Hleung,

 Buy land in strategic locations, build brand new homes and hold on indefinitely.  After each project, I've gained instant equity of approximately 20%,

This strategy looks good in principal and I am not knocking it in any way at all, however I believe that the 20% instant growth that you are receiving is based on the difference between your building cost and a Developers mark up plus the GST saving that you would have on the construction contract.   This is great and would work a treat in Suburbs closer to town equally as well (if you can find the land).   My doubts would be on the short term capital growth rate of a growing suburb.

I agree with your comments in your last post and would like to see further discussion.   As to my choosing Coorparoo as a suburb, I can confidently say that my research shows that the same data would apply for any suburb within 6K GPo in Brisbane.   Obviously I can not speek for other States, Cities, Towns or beyond the balck stump.

I have also read many of the Authors that you mentioned, in fact the results of my calculations were calculated on Jan Sommers PIA programme.   I am also relying on the experiences of over 20 years of being in the real estate business and having witnessed other peoples successes and failures (not to mention my own).

Jon

Hleung stated,

I'm sure I would have done a lot better if I invested in land because it is the land that goes up in value, not the building which goes down in value. I really don’t know who started this story, but I believe that it’s time someone gave the other side to the equation. There are two main approaches that people can take when deciding to invest in property and we should first understand these differences.   We can enter into a long term investment or speculate.   For most full time working Mum and Dad investors, the long term investment is the best option.   On the other hand (and I really think that this type covers the majority of investors on this site) some people enjoy speculative investment.   This type can be varied but usually centers around a value add scenario or development.   Don’t misunderstand me, both types can be viable, however I stress here that with speculative investment, in most cases you simply buy yourself another job and pay more tax (both personal and Cap gains). As the statement above is more often than not related to long term investments lets analyse the facts a bit further.   While it is fair to say that I have not researched Inner City Units compared to Outer Suburb Houses (I will try to find the time to do so), but from here, I am going to rely on figures that I have previously researched for the suburb of Coorparoo in Brisbane.   We are going to look at a ten year period from 1994 to 2004.  Now the first thing we must agree on is that as we are attempting to analyse which is the better investment we must get rid of all emotion (virtually impossible for the majority of investors) and consider the rate of return on the actual money that we invest in the property.  
The Assumptions 
Information                                                  House                                    Unit
Median price 1994                                       $160,000                               $120,000
Purchasers Income                                       $47,000                                  $47,000
Capital Growth Rate                            9%                                           7.15%
Inflation Rate                                                     6%                                           6%
Median Rent return 1994                             $165                                       $150
Median Rent return 2004                             $275                                       $248
Management fees                                            8.25%                                     8.25% Rates                                                              $1,800                                    $1,200
Building Insurance                                         $400                                       In BC Fees
External Maintenance                                   $1,000                                    In BC Fees
Body Corp Fees                                           Nil                                            $1,200
Borrowings on Int only at                              6.5%                                       6.5%  

Using the data above in a Property Investment Analysis projection we find that over ten years the results are as follows. 
Information                                                  House                                    Unit
Purchase Value 1994                                   $160,000                               $120,000
Value2004                                                     $378,778                               $239,388
Equity                                                             $210,795                               $112,871
Investor Contributions
Over 10 years                                                $33,722                                  $8,581  

However, when we started this analysis we stated that what we were looking at was the rate of return on the dollar that we invest, so that in order to make the investments equal we need to divide the House investment of $33,722 by the Unit investment of $8,581 which will give us a coefficient of 3.93.   We must then multiply the Equity of $112,871 by the 3.93 which would give a figure of $443,583. In other words if an investor had to decide whether to contribute $33,722 into a house investment in order to make a gain of $210,795 or a unit investment to gain $443,583 – should the value of the land increasing and building decreasing have any bearing on the decision? 

I’ll leave you to make that decision, but hasten to add that there is more to a good investment than land value.

Jon

I fully understand that my comments will most likely be considered as biased, however it is my opinion that the capital growth difference between houses and units within a close proximity to the CBD of Brisbane (5k) is almost the same.   The shift in demographics and with affordability as it is combined with Council requirements regarding post 1946 housing in these inner areas (character housing) has to a great degree levelled the playing field.   If you can no longer remove a house from the block of land it could be argued that the land is actually devalued.

My 2c worth – happy to discuss

Jon

Bob Andersen said,
 What you're proposing is speculation, not investment.

This is quite correct, in my opinion, there is a huge difference between speculation and Investment.   I notice that many people on this site get the two mixed up.   Buying off the plan with the intent to sell either prior to or just after settlement requires a lot of research.   I have seen people make a lot of money and also loose a lot of money speculating this way.

Be very carefull and for goodness sake don't listen to anyone who is likely to gain from the sale.   Get indipendant advice.

Jon

blogs wrote:
There certainly does seem to be a re occuring theme of the tradies being very 'sensitive' and overly defenssive. On one side there is an argument about sub standard work being provided and people being ripped off, and yet the tradies who all reply seem to ignore this totally and reply in defense of their self worth and right to make a living and that they are not second class citizens etc-seems to be some deep seated issues there fellas……therapy anyone??

I did make one comment early in this stupid thread and have since just sat back and read in amazement as the posts have just kept coming.   Blogs, I think that you are suggesting therapy for the wrong people.   I'm possibly on my own here, but I just can't believe the number of so called investors who seem to believe that everyone owes them a living so that they can go on to be self made millionaires.   At anyone elses expense but their own – Just look at the posts that suggest Agents are overpaid and do a lousy job – Mortgage Brokers are ripping people off – Tradies charge too much – Lawyers and Conveyancers are too dear – Don't pay for advertising –    It seems to me that people (read investors) need to learn economics before attempting to create IP's.

My 2c worth on this boring subject.

Jon

KA010,

1) Can you suggest a proffessional body that would be able to assist in the process of putting together a formal proposal to the owners i.e should I approach a solicitior, surveyor or would you suggest just corresponding directly with the Body corporate (is it something the body corporate are not going to want to proceed with) or alternatively do it myself

An interesting question and I'm not sure if it is the way you have written it or my missunderstanding of the way that you have written it.   It seems to me that many people have an incorrect understanding of Bodies Corporate.   The company that has been employed to run the Body Corporate for a complex are in fact just that – employees.    The owners of the indvidual units in a complex form the Body Corporate and as such they dictate to the Employee (Body Corporate Companie) what actions they wish to be carried out.   The main purpose of employing a Body Corporate Company to run the show is to make sure that everything is done legally and on time and to hold the records in a secure place for future reference.

2) The Annual General Meeting agenda has already been set therefore how can I put forward this idea before the meeting. I have the name, addresses and number of all owners, should I put something together and send it off to the owners individually? I agree I should give them the chance to asses and review the project themselves before the meeting

At this point in time, I would not bother to enlist the assistance of any one who is likely to charge money untill you have assessed the general feelings of the other unit owners.   You may have an opportunity to discuss your thoughts at the meeting during General Business.   Perhaps then (if you get enough support) you may be able to go away  and come back with some quotes for further discussion.

Jon

Hi Kensington,

I would suggest that you talk to your friends in PNG and see if any of them can point you in the direction of an Agent who they may have had a good experience with and contact them and ask if they are prepared to help you find a place.

The real problem that most Investor Purchasers have is taking away the emotional side of the equation of the purchase.   As agents we look at property daily and often see one that shows an exceptional return for one reason or another, however, trying to convince an  unknown investor of this is nigh on impossible.   From your time poor position the biggest decision that you will have to make is one of trust.

Jon