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What about negotiating with current lender for extension of IO or extension of loan repayment timeframe? Or negotiate with them for a P and I rate reduction, any of which could reduce the monthly out of pocket to a more acceptable level without major changes. Gives you time to ride the cycle and perhaps sell into a better market in the future. You may have already considered, just making sure all avenues are checked.
anyone had any dealings with JDL since 2016?
Have they improved or are they worse?
I went and heard the pitch last yr as a friend invited me. As far as companies that recommend new House and Land stock go there are worse ones out there. The physical quality of the house will still depend on who builds it. However, the trouble of valuations coming in under the purchase price and very low growth in the first 3 yrs is the main issue with a generic H+L strategy in new estates. My comments are about the model and the strategy not a debate about the personal ethics of a company.
I pointed these things out plus the fee structure to my friend and he did not proceed.
Buying established housing in high demand areas (with no oversupply of land around) is the way to generate growth faster.
Adding value through renovations or small development can also speed things up from an equity growth standpoint.
If you must go new, I suggest a split contract, buy your own block of land and build your own home to ensure full control of the process. If you want better cash flow, build a dual occupancy or dual income house product.
Either way choose your locations and your builders carefully there are lots of lemons out there.
I’m looking at doing the same thing. The reason I’m looking at doing that is because in the long run realestate is a hedge against inflation, has a yield greater than money in the bank, is a real asset compared to a piece of paper whose value depends on a huge range of uncontrollable risks and it reduces the temptation to blow the capital as its not easily liquidated. I wouldn’t do it if I needed the capital to live.
John did you end up buying anything?
Hi everyone, just moved to albury and i am looking into investing in real estate. Does anyone know how much are the rental yields and capital growth rates at the moment? Should i invest in a house or a unit? Also , do i get any help as a first time buyer? Any reply would be much appreciated.
Hi @kristop – rental yields vary a lot depending on the price you pay and the rent you achieve. In general you will get more rent for more bedrooms and nicer paint/carpet/cosmetic condition. Plenty of research for you to do before you jump in. Albury is a great town but not the only place to invest either. Are you planning on living in it?
Just saw this old post. How did you go @jasondras80 did you buy something?
Anyway… my observations are that there are huge differences between some country towns and others. You simply can’t generalise them as “good” or “bad”. It’s like asking if buying food from the supermarket will be healthy or not? It depends what you buy.
In general some guidelines:
1 stay within a few hrs of the major capital cities if you can.
2 stick to larger towns
3 Coastal regional options are best for capital growth
4 Anything with new infrastructure that will increase population or jobs is great, get in early
5 Look for regions where housing stock is limited and amount of land zoned for future housing is constrained.
6 Look for diverse economies (not 1 employer towns)
7 Look for strong rental markets with low vacancy rates.
8 Look for deals with value add opportunities like renovation, development etc
We do this all the time and have a lot of towns we won’t touch, and some we love.
All the best
- This reply was modified 1 year, 11 months ago by BuyersAgent.
The short version is this:
Stay away from spruikers – anyone marketing new off the plan units or House and Land packages that takes a fee froma builder, they are not true BA’s and they are not working for you.
Stay away from anyone not licenced AS A BA.
Stay away from anyone doing both selling and buying.
Stay away from anyone without a few yrs experience and a track record of happy clients.
If you do your research, keep your brain switched on and take any outrageous claims with a grain of salt you should do ok. If you build a quality team you can indeed achieve more in less time.
Regarding fees – all the true BA’s will charge. The ones who don’t are getting paid by the other side and you are not their client you are the stock on the shelf being sold to the client (the builder).
Usually the fee is made up of an up front retainer between 20-50% (to get rid of anyone not serious) and a success based completion fee. There are fixed fees, flat fees, percentage fees and hourly rates all in the marketplace so just ask and make sure you understand the fee being proposed.
We are now looking at lauching a new 100% loan style product as part of BA service or a 90% No LMI product for buyers in a SMSF.
Anyone care to comment on whether wuch a product would help them get into the investment market or help them increase the portfolio either individual or inside their SMSF.
I have no idea how the 100% product is linked to a BA service – I would have lots of questions about that (including whether both products were genuine and independent of each other) however I would think that a 90% no LMI product for SMSF purchases would be a game-changer and very popular. I have a lot of SMSF clients who have slowed down or stopped purchasing in their SMSF because of few lenders, lower LVR and various other restrictions limited their ability to leverage.
In short – yes it is likely to be harder to sell at the end also if the BC still applies. The only change would be if the land is subdivided out of the BC area and ends up on its own title later.
Also, check the BC rules and ensure you can actually build what you want before you commit.
For resale estimates, you need to ascertain if there are any comparable sales of similar homes WITH a BC attached. These are your guide.
Lastly I would be talking to your finance institution as this sounds like a unique property and they may not lend as much as you would like for a purchase and build scenario.
Hi thanks for the check up, no still thinking on my strategy as where to look/buy that will give me growth over a length of time, I dont want to commit to the wrong house in the wrong area.
very true. the difference between buying the the right area/wrong area is night and day.
keep going and do your research you will gain clarity eventually. In the meantime you might think about mapping your goals, and then choose things that are important to measure. The measurements will help you cut down the big locations list to a shorter list. I personally think that supply and demand are the most important drivers, with growing populations meaning more demand and constrained housing supply being way more important than most people think.
Another example of a really important metric for investors is vacancy rate. It is important that this number is low (under 2.5% ok but the closer to zero the better) as it means more tenants fighting for your home, which means short vacancies between tenants, more rent increases etc. If you can have rising rents in the first few years everything gets easier – you are less likely to ever be forced to sell at the wrong time and growth comes eventually too.
Some examples of these markets include:
Tweed Heads 0.9%
Ideal Retirement climate, growing international airport, large new regional hospital, perennial tourism and surf/beach industry.
Express trains viable commute option to Sydney, close to Wollongong University, it is the first affordable option heading south in Wgong compared to the northern suburbs which are more expensive
Affordable housing next to Canberra, comparably investor friendly rules (ie freehold land ownership, less onerous land tax rules than ACT)
Major Central NSW regional hub, university, hospital expansion, agricultural and mechanical repair centre.
Canberra commute option on the Sydney side, correctional centre.
I have blog post here with the full list of 20 low vacancy rates across NSW worth considering. Also if you want a free property buyer’s cheatsheet which helps note things to do to avoid lemons and some free goal setting sheets you can get that too. All the best with your decision making, keep reading you will get there.
The town in which I’m looking at investing (Wellington NSW) as I grew up there and know the area has a median house price of 160k. Located just 50km is Dubbo, where house prices are much healthier. As I have low capital I’m looking to buy in Wellington. I’ve found plenty of properties with large land size, would it be profitable to buy the block, subdivide, and sell the back block off?
I’m a little concerned with the market in the town and a possible over supply?
Any advise to investing in small towns is greatly appreciated.
Thank you and kind regards, Tyron
I know you say you grew up there which may help but there are concerns with investing in Wellington. The vacancy rate is 4.6% which is highly concerning and may mean you have long vacancies in between tenants (how do you feel about 2-3 months of paying the mortgage by yourself). Also the town has had a well publicised methamphetamine problem which impacted the social quality of the town for years. Please be careful. I know you want cheap but there are better markets than that that are still somewhat affordable (I have written about them here and on my blog before).
2nd point, if you have such low capital it is probably not ideal to be doing a subdivision project. My first one took more capital than I thought it would. You need spare cash to do those in my opinion. What about a simple home in the 200-300k range with perhaps a minor cosmetic renovation? You could get WAY better markets if you can stretch the budget that far.
3rd point, if doing a subdivision in such a cheap town there may be no market for the final blocks? Plus the cost of the civil works may even be more than the market value of the land. There are points of diminishing returns on some of these things.
Sorry for being blunt but you have a few things to consider there. Good on you for having a go and asking!
Ikea is cheaper and has long years of warranty. I choose Ikea if you have two choices only. Anyway, try to find cheaper yet good quality.
The last time I looked at IKEA kitchens the backing of the cabinets was a bit thin. Happy with them otherwise but I like to know the cabinets are solid. I choose Bunnings for that one but this was in coastal QLD area and my options were limited. Haven’t checked the cabinet strength of the Kaboodle ones.
I understand what you are saying regional areas are probably more suited to an income strategy rather than growth, I was probably focusing on this area due to the lower prices as a start to get my foot into the market but this may not be the best scenario for future growth ?
Property management I assume I would look local, eg.real estate agent.
I didn’t really take into consideration who in the future the purchaser would be I would hope the area has gone ahead and risen in value so the property may be more desireable but this is all hindsight.
With my time frame your suggestion that it might be better to save more and look at best address worst house this may be better in the longrun.
Thanks again you have given abit to think about.
How did you go so far @ajg71 Adam? Any progress on narrowing down your areas?
Thought I would introduce all PI members to an Australian first in the SMSF property loan space.
In conjunction with our legal advisers & Superannuation Lawyers Cooper Grace Ward we are now able to offer SMSF’s an opportunity to purchase residential property in QLD, NSW, ACT & WA property to a lvr of 85% without having to go thru the expense of setting up a Bare Trust or incurring LMI.
All property locations are considered and there is no minimum SMSF Balance or high servicing hurdles.
We have approved a number of applications this week alone from SMSF’s that have been told from other lenders that they don’t have a sufficient Fund balance (Usually 200-250K) or they need a percentage cash surplus post settlement.
If you are looking to purchase a property inside your SMSF and want an alternative finance options or have an actual SMSF scenario feel free to drop me an email and we can send you some details.
Yours in Finance
Can I ask how you offer loans for SMSF property without the bare trust? If you have private finance I can understand a higher LVR but I thought the bare trust was a legislated requirement because of the LBRA rules? Is that also sidestepped by private finance? If you prefer to respond via private message I understand as I am curious but perhaps you have some commercial in confidence or intellectual property you don’t want to share in public.
Our build is about 2 months in now. The other side and rear of our property is fenced. We need to approach our neighbors at some stage after both houses are built to erect the middle fence.
ok – I agree getting all retaining walls and levels right prior to erecting the fence is a good idea and should help avoid doing it twice. All the best with the approach!
Mortgagees have fiduciary duties to get the best possible price and so do executors. They are also more difficult to negotiate with so I think this will be a hard way to find an undermarket value property.
This is true, sometimes better deal is the private vendor in the final few months prior to handing the house over to the mortgagee (if they have equity but are otherwise in financial stress).
Occasionally if unfinished, ugly or requiring work mortgagee properties can pass in at auction (as they didn’t quite hit the sworn valuation figure at bidding) and the banks are usually then more realistic afterwards so decent deals can occur but don’t get your hopes up of buying half price houses.
Excellent first post @beas and true life is too short to be mean.
@markb10 so where does this leave you currently? Are you still fenceless?
Haven’t seen many updates to this thread recently.
I have a recent client deal that looks to be our strongest cash flow deal this year – purchase price negotiated at $650k, current rental (house plus legal/approved Granny Flat both tenanted) combined at $810pw for around 6.48% gross yield. That will drop to 6.4% or just under as a few repairs are required but no major renovations needed.
The best thing is this is in the Wollongong/Illawarra region – so a decent capital growth region. The buyer definitely benefited from a motivated seller moving away being willing to negotiate. They paid over $700k some yrs ago.
How are people going finding positive cash flow deals in 2019?
We looked into a SMSF about a year ago and banks would only offer 70% LVR and rates were approx 6.25% from memory.
Likely to have dropped with recent rate cuts. We decided to hold off for a few years.
True but “only” 70% lvr means you are still getting leverage that you wouldn’t otherwise get in a super fund investment. IE if you have 200k in any fund and buy shares you get 200k of shares. Even at 60% lvr with 40% deposit (which sounds like a lousy lvr in real estate) you get a $500k property with $200k deposit and $300k loan. This means you have $500k of asset that can grow instead of $200k of asset. (PLEASE NOTE I am ignoring other costs like stamp duty and buffer funds to keep the example simple) Assuming similar positive capital growth rates over the long term you will win having more exposure. The idea is that even with low lvr you get SOME leverage and your money gets into a bigger asset which could mean magnification of gains (or losses). I am not saying this is right for everyone but (in general) for younger people with time on their side and money to invest in the fund it might outperform normal fund investments because of the leverage. Not financial advice.
If they are still receiving commissions from builder/developer they are still NOT acting in your interest. All of the original advice provided by myself and the other posters in 2016 should still apply. Commissions are higher than ever which can result in nasty high pressure tactics. See recent articles about some commissions on units. https://www.afr.com/companies/financial-services/developers-offer-advisers-90-000-to-flog-high-rise-apartments-20190813-p52gk1
The take home message is still the same as Benny says, do your research, ask good questions and either be prepared to do things yourself or else build a team of actual professionals who will do quality work for the fees they charge you. If using a Buyer’s Agent they really should be REBAA accredited for example this will ensure they are not selling property as it is part of the code of conduct.