Forum Replies Created
Shahin, what would you base your "don't like my chances" on?
The fact is, i can rescind my contract at any stage, so here's whats against the developer:
- He has someone who can leave a contract 6 weeks out from settlement who paid $485k
- He would need to put the unit back on the market, pay the agents fees all over again, and then try and get at least the $485k (keeping in mind the he knows the banks are only valuing at around 460k).
- He would have to spend more time/money to sell something that has already cost him some money therefore 12.5k is not ideal, but the lesser of two evils.
I don't understand what you mean by "if he drops the price, he drops the valuation on future properties in the complex?
All 36 apartments have been sold, all 36 apartments are being settled in 5 – 6 weeks time. Keep in mind, that i purchased in 2010, and i am the only person that can rescind my contact, with all others purchasing in 2011 onwards.
Not sure what you mean by droppingvaluations on future properties because they are all owned by different people and will have been settled in 5 weeks time.
I appreciate everyones opinions and feedback. The main questions i had were to do with:
- If the banks struggle to find comparable sales, but there is plenty of similar type new developments in construction selling around what i paid, would it be fair to say that they had a hard time getting a figure therefore they went very conservative &
- Is it worth negotiating with a developer after a poor valuation.
General consensus is that yes i should negotiate with the developer (seeing as i have leverage being in a position to rescind the contract with no financial consequence to me).
The other question hasn't really been addressed, check out the area Hughesdale VIC. There's nothing of the sort.
FYI, the project is http://www.lantanaapartments.com.au just to give you an idea as to where it's situated etc.
Sentiment wasn't the appropriate word, more so the need to move out of home. As i said I'm at the point of cracking and need to get out ASAP.
I don't see the issue in getting a nice 2 bedroom apartment that i'm planning to hold for 10 years, which should provide around 400 per week min rent (4.2% yield) in a growing market (there's no doubting we are at the bottom but 2013 has already shown signs of recovery).
By requirement i have to live in it for 12 months for FHOG so as soon as that is complete, i'm out and going to rent it out.
As an investment, say the developer gives me $12,500 off my contract price, that means the valuation is only 15k lower, and i've already explained what myself, and a few other people in the industry who i've spoken to believe the place to be worth higher than that figure.
I would argue that in times when banks are being very conservative, on a 480k property, you would pay 10k over the valuation price. Especially if they admitted they had big issues finding comparable sales (seeing as though they are such statistically based this really makes it hard for them so they go very conservative).
The 3 figures they compared my 485 purchase to were 433 (far inferior old place), 495 (better location apparently), 505 (superior location/build).
In the middle of it is 460k which is the figure they got
Unfortunately not because the valuation is done before settlement of these units, and you can't use the incomplete developments as comparable sales until they are settled
So theres all these people in the same building in the same boat as me, but there is plenty going up around that are due for completion 2013/2014Hi Qlds,
Hughesdale is 15km from CBD, surrounded by good suburbs in Carnegie, East Bentleigh, Murrumbeena, Oakleigh so position is good for future growth and rental appeal.
The valuation from the bank IMO is below market value, as they even admitted they don't have enough previous sales history in the area to compare. It's the first of it's kind in the suburb, but i can guarantee that in the next 5 years there will be at least 10 of these types of developments in the area as it's all been rezoned etc for higher density living.
I'm definately using the valuation to my advantage, i've submitted a letter with the valuation to the developer and demanded a reduction in the contract amount otherwise i will rescind.
In all honesty though, i need to move out of home (i'm 27 and at the point of cracking), plus i'm going to move out of Hughesdale within a year (due to claiming first home buyers), then rent it out and hold long term.
IMO the property is worth at least 470 – 475k, therefore i just need to wait that year and hopefully the growth is there. Melbourne had 1000 auctions last weekend at a clearance rate of 70%…….We struggled to crack 60% the previous year now we haven't dropped below it, and i believe the market is on the up in inner and inner south east suburbs.
I've got the money to cover the difference, plus i've got another 50k to work with for future investments (not to mentioned my south yarra apartment which i bought in Sep12 and already have gained some equity in CG).
Thanks Jamie.
I'm legally allowed to walk away from the deal (and take my deposit back) should i wish to do so.
I've got the additional 25k to cover the difference from the contract price and the banks valuation however i guess i was more seeking feedback as to whether or not entering negotiations based on a lower val was common and worth while.
I guess i've got nothing to lose, they will either call me out on my bluff or they will realise the costs associated with putting it back on the market would be a lot higher, not to mention the valuation was lower so they might have trouble getting another buyer at 485k.
Kind regards,
BigO
Hi Derek,
At a minimum, i believe the property to be worth around 470 – 475k as there are comparable sales (just not completed yet as they are still in construction).
On top of this i factor in that I'm getting 9k first home buyers grant which i wouldn't have if i walk away, so that justify my 485k purchase price IMO.
Agree with you that a 16k difference after taking into account the 9k of FHOG is minimal in the scheme of things, and I am willing to hold onto this property for a while (it should get at a minimum 4% rental yield ($370 per week) based on being close to public transport, chadstone etc).
I've spoken to the solicitor and both parties can rescind at this point in time, whilst it would be rare for the developer to do it when the market is lower than my contract price, there is every chance he could crack the shits with me asking for the 12500 reduction, and put it back on the market, even if financially it doesn't make sense.
I've since had my solicitor send a letter to theirs, stating that the 25k shortfall is going to make it hard to complete settlement, and i can raise half of this, of which the other half we have asked for in reduction from overall cost. The developer will either say yes, no (rescind if you want), or no (i'm rescinding and putting it back on the market – UNLIKELY).
I come on these forums just to get some unbiased opinions and they definately differ from each person but the general consensus is that if i went and got it valued by an independant valuer, after the completion of the other oakleigh units in 12 months time, the property would be valued at least 475k which is fine with me.
It was more the negotiation side with the developer that i was unsure of, but i figured i'm in a good enough position to ask the question. Especially considering i was lied to throughout the whole process with start dates etc, the purchase was meant to start within 6 months of when i bought, but we are just nearing completion 3 years later!!! Mind you it gave me time to save and purchase in South Yarra so it's not all bad.
Thanks Freckle.
I'm buying for a bit of both, as moving in for 12 months to get first home buyers (plus i NEED to move out of home, the parents are doing my head in), but then i want to rent it out after that as an investment property which i would be looking to hold for at least 8 – 10 years.
I really want to get into the market, and having seen others being sold up the road for similar amounts, in the bottom of a market, I'm personally expecting to see CG but very minimal for the next 2 – 3 years, and then hopefully the market moves upwards again at a faster rate.
The biggest issue i think with the VAL was that there was no comparable sales. This makes me think they've used the figures available (albeit not really comparable) and placed mine in the middle. 433k – 505k the middle is 460k
I have the cash, I've got the 25k plus another 70k which will sit in my offset (until i pick my 3rd investment), and I'm doing interest only 10% deposit loan.
I guess i came on here hoping that people agreed that i should negotiate with the developer to get a bit of a price relief off the contract price. Which i'm going to do as I would think for 12.5k he would have to spend that amount again in agents fees, marketing etc.
They really are in a nice location, literally 150m away from heart of Oakleigh shops which has nice cafes. Right near Chadstone Shopping Centre, Oakleigh train station, princess dandenong hwy/monash fwy, Hughesdale P.S, across the road from Sacred Heart High School. So i'm convinced that this will go down the path of it's neighbours in Carnegie, Murrumbeena, East Bentleigh and provide good growth as population keeps increasing. Not to mention theres a bucket load of work to infrastructure to be done in Oakleigh which is part of a new zoning/redevelopment plan to make Oakleigh another city style hub.
Maybe I'm trying to justify to myself too much but at the early stage i'm not too concerned about lack of short term CG as i'm going to hold this property due to it's rental attractiveness for location etc.
The problem is there isn't any comparable sales in the area.
The development in Hughesdale is the first multilevel apartment of it's kind, with any before it being done 20 years ago out of brick and quite old/run down basic build.
The only ones i can find in the vicinity that are comparable are in Oakleigh and are off the plan (only slab and framing has gone up), therefore i can't use these due to the fact that it hasn't been completed/settled. Although these have sold for 485k, the same as what i paid.
I have the 25k, so from my point of view the only real option i have is to try and get a discount from the developer to bridge the gap, so that i'm only putting in 12.5k of my own money to settle.
I wasn't sure if negotiating a contract after a low valuation is something that occurs often.
I've bought 2 OTP properties.
6 weeks away from settlement of the first and the valuation came in 25k less than the contract price from 2010 (3 years ago).
I have enough cash to cover this, plus i'd lose half of the first home buyers grant if i rescinded (around 9k), so i'm pressing forward but will certainly be more cautious moving forward and check out comparable area sales and get my own val done prior to commiting.
FYI, my second property is a 1 bedder in South Yarra, i got it for 475k and already had an independant value done which came in at 505k. This is off the contract so there are variables but it's made my decision moving forward on the first property a bit easier as overall my portfolio is in the positive.
Do your research, learn about the pros/cons and then act.
I was green behind the ears and rushed in without learning and now i'm going to start 25k behind the 8-ball so to speak.
Thanks Jamie, seems as though you're the resident go-to on the site! (which is much apprecaited).
The problem is, i can't find 3 comparable sales in the last 6 months as there isn't any, and the ones that have been sold are off the plan so not yet completed or settled. (Identical development around the corner being sold as the slab is being laid, they are going for $485k + but i was of the understanding that off the plan and not yet settled developments can't be used for comparable sales).
Due to being in my work for only 3 months (got a promotion of sorts to a new company), the only lender that would lend 10% interest only of the big banks with a reasonable rate was CBA.
I've sent a letter to the developers solicitor (via mine) to say that i'm 25k short of the contract price in valuation, i can raise half of this however they will need to meet me halfway in order to allow me to settle successfully in 5 weeks time.
I guess the costs of reselling, the fact theyve already paid agents commissions on my sale etc would mean that they would need to sell the place for at least $495k in order to break even on the unit, which is highly unlikely due to fact the building is near complete so no stamp duty savings for buyers, not to mention it was valued by a bank at 35k less than this figure.
What do you think? Worth a go?
Qlds who would you lean towards more for this kind of deal?
Only reason I said CBA is at this point in time i've got all my accounts with them, i havent done any review/analysis of home loan products yet.
Cheers QLDS, i agree with regards to NAB.
I only did a preapproval to "test the waters" on borrowing capacity, along with the fact that the lady i met with was a colleagues wife.
I'm leaning towards CBA but I'm meeting with my mortgage broker next week to discuss other lenders and products.
Thanks to you and Jamie's advice, im most definately going to put down 10% and keep the rest in the offset.
I know it seems selfish getting all this advice for free online but I really just want to learn all the available options so that I am armed with this info heading into discussions with brokers etc.
Thanks again.
Thanks Derek, valid point on the valuations.
With regards to valuations, this was completed only 2 months ago by the developer (independant valuer) and the figures came out at 505k which is 20k more than what i purchased in 2010.
Not really making grand plans, just ensuring that i have my loans structured correctly from the start and a financial goal to follow.
Even if the property dropped between now and settlement, i would still have 20% deposit should i need it.
Thanks guys, extremely helpful information.
I think the best way moving forward will be an I/O loan with linked offset for Hughesdale.
I'm also going to put down the minimum depost, cop the LMI and then put the remaining monies in the linked offset. That way my money isn't locked away for when it comes to buy a PPOR.
Ideally i want to have approx 150 – 200k in the offset to purchase the PPOR, based on when i settle at Hughesdale, i will have 85k to start with.
Jamie do you think it's worth doing a split say 340k I/O and 100k P&I, is there any benefits or disadvantages???
Thanks JP, will do.
I have already got pre approval from NAB and the settlement in Feb is for PPOR, which i hope to turn into an investment in 2 – 5 years time, so for the time being i don't have to worry about tenants.
Thanks Jac.
Are any of them based in Vic, i understand these days with email and phone it's easy but i prefer to deal with someone local e.g. Victoria
Thanks Jeano for your response.
To answer a few of your questions, I am looking to hold both units as long term investments.
Ideally what I want to do is settle Hughesdale (2013), settle South Yarra (2014) and then at some stage within the next 3 years (2013 – 2016) purchase a PPOR which i intend to live in for quite a while (nothing over the top, just 3 bedroom place with bit of backyard etc).
With regards to oversupply in the market, the place in South Yarra is in a low density area, it is in a boutique development of 30 apartments just off the very popular Chapel Street. The size of the one bedroom is 54sqm + 8sqm balcony. It is the biggest of the 1 bedrooms in the complex (only 1 other like it) so i am fairly comfortable with the investment.
So is it maybe a better option to have an interest only loan (potentially p&i on say 100k, the balance interest only) and then use the freed up cash to sit in the offset account, so that when i find that PPOR i can drain the offset account to pay off as much of the PPOR as possible whilst claiming my tax benefits on the 2 x investment properties?
Thanks for your assistance.
My goals for 2013 are fairly simple:
1. Settle on my first house (feb)
2. Propose to my girlfriend
3. Increase my knowledge of investments prior to settlement for my first investment property (settle in 2014)
4. Accumulate accumulate accumulate $$$$$$$$$$$
So theres all these people in the same building in the same boat as me, but there is plenty going up around that are due for completion 2013/2014
