All Topics / Help Needed! / How do I know if this is a good investment?

Viewing 11 posts - 1 through 11 (of 11 total)
  • Profile photo of Cathy.GCathy.G
    Participant
    @cathy.g
    Join Date: 2010
    Post Count: 22

    Hello, recently I received a cold call from someone wanting to tell me how the government wanted to help me save for my retirement. I went to a free one hour seminar where we were told how most people retire on very little. Various investments to avoid this were discussed including using gearing to invest in property On the evening an appointment was made for a consultant to call at my home to collect financial info to prepare an individual financial plan. The plan needed to be collected the next weekend at an expo. It was fairly obvious after this that they were really only interested in property investing. At the expo couples met individually with consultants. First a morgage person ran through how negative gearing worked using some computer software. Next a real estate person showed us some specific properties. One that was recommended to us was a development called "The Views" in Gracemere which is near Rockhampton. The land was 600m2 and valued at $125,000. The house land package for a 3 bedroom house with 2 bathrooms (one ensuite) and a double garage and airconditioning cost $319,500. Predicted rental was $320 per week. Stamp duty and loan set up costs came to almost $30,000 which included about $6000 for them to do everything for you. The land is not yet registered, this is about 4 weeks away so before being ready to rent would be about 5-6 months. Holding costs during this time came to about $20,000. I can't remember now if this was included in the $30,000 loan cost or not. The expectaton was for us to sign a contract on the day with a $1000 deposit. From the figures they showed we could easily afford the weekly negative cash flow. We have never invested directly in property before though I would like to do so. When we said we were not sure we wanted to take such a big step we were told it was just fear and it was best just to go ahead. They were not prepared to give us anything to take away so we could consider the matter. I am not sure how to decide if this is a good investment or not. I googled Gracemere when I got home and there seems to be a lot of new houses being built, land for sale and new houses for rent. Any advice much appreciated.
    Cathy

    Profile photo of DWolfeDWolfe
    Participant
    @dwolfe
    Join Date: 2009
    Post Count: 1,253

    Hi,

    This is where you need to really do your homework. What state are you in? Are you close to this area? If not it will make it harder for you to check the facts and figures without going there. I would make a heap of phone calls before anything else. Ring several realestate offices in town. Is the price about right for that sort of thing in that area? Is the rent the right price? Are the figure projected or real figures for today? Check the demographics, is there a large population, is the town growing, what else is there, big brand shops, high schools, jobs? The list goes on. 

    Ring your accountant and ring a separate bank etc regarding the finance options.

    If they will not give you any info to take away be wary. If they want to you sign right there and then be wary, if they suggest negative gearing as a great option for you be wary. There are plenty of ways to invest directly in property and any one who is giving you advice should not be trying to sell you something. I smell a spruik (please anyone correct me if I am wrong).

    I would be more inclined to hang around here for a while (especially if you have no investment properties as yet) speak to the great mortgage brokers who practically live here they really know their stuff. Look at some properties on realestate.com and post some of them and ask for opinions. These opinions are free and most people here are not trying to sell anything.

    There is plenty of property in the country and there may be better options than dipping into your pocket every week. Grab a copy of Steve McKnights book and have a really good read as he is all about positive cash flow property rather than negative. Another good read is any of Margaret Lomas' books (she also is on pay tv on Monday nites).

    Good luck feel free to post questions and someone will try to answer them :)

    D

    DWolfe | www.homestagers.com.au
    http://www.homestagers.com.au
    Email Me

    Profile photo of LalibellaLalibella
    Participant
    @lalibella
    Join Date: 2007
    Post Count: 116

    Hi Cathy. I sincerely hope you haven't signed anything. I agree with DWolf entirely.
    Alarm bells should ring loudly when someone cold calls …for anything, let alone a major investment decision. (I love my silent number )
    Theres' no free lunch and their product / package may be fine, however they are charging you a premium for the privilege of finding the property and 'doing the deal'. Something you could do yourself with a bit of direction and self education.
    I love the line about fear….how patronising of them. We have fear for a reason and one of them is to run away from these spruikers as fast as you can.
    Theres absolutely no hurry in real estate when your starting out, take your time and self educate.
    Holding cost of $20k????  are they serious? No rental income for 5-6 mths and they want you to pay $800 ish week  while you wait for  their unregistered land to become available to build.?
    RUN…….

    Profile photo of DWolfeDWolfe
    Participant
    @dwolfe
    Join Date: 2009
    Post Count: 1,253

    Yeah I am totally with the rip off bit with the holding cost. I wouldn't settle until I could take control of the property and if the property is not ready for four months then settlement will be four months. They are just getting you to help foot their interest bill.

    D

    DWolfe | www.homestagers.com.au
    http://www.homestagers.com.au
    Email Me

    Profile photo of frosty1frosty1
    Member
    @frosty1
    Join Date: 2007
    Post Count: 61

    Hi,
    I smell a rat,  run as fast as you can, away.
    Run to the library, and read as many property investment books as you can.
    Margaret Lomas has several books, well worth reading them all.
    Ask lots of questions here as well.
    Good luck,
    Frosty1

    Profile photo of Cathy.GCathy.G
    Participant
    @cathy.g
    Join Date: 2010
    Post Count: 22

    Thankyou so much for all your comments. I live in Adelaide so not close enough to check out the site personally. I did not sign anything on the day. I guess I'm always hoping that the easy way will work out alright.
    Cathy

    Profile photo of ClaireeClairee
    Participant
    @clairee
    Join Date: 2009
    Post Count: 38

    Good for you for not signing!

    Profile photo of pinkboypinkboy
    Participant
    @pinkboy
    Join Date: 2010
    Post Count: 49

    I know the exact company you are talking about.  I went to thier 'seminar' in my hometown.  Shifty mob.  They invited me for a private consultation with thier 'finance guru' and showed me around all thier properties.  I went only for a bit of fun and some time out from my business.  I say they are shifty as when they were punching in my numbers of property values, LOC's, other current assets etc – they were fudging around with 'predicted interest rate rises' so that my available situation was about $20,000 more than properties thay had on offer.  Perfect for them, and they were calling out across the room that 'Mr. xxxxx'  would qualify for 'x property' in front of the other few couples in the 'qualified' field.  They were trying hard for me to purchase the last property in 'Stage X' of that development.

    If an offer seems to good to be true…..you know the rest….

    And if they are so good at predicting the next 'capital gain boom', why then does that stop you from buying some land in that particular area, getting your own builder, and pocketing the 'holding cost', plus the advantage of construction loans etc.

    The part where you say 'the Government wants to help you save for your retirement' – an ITVW is hardly a secret.

    You have been given some good advice above.

    Profile photo of House CallHouse Call
    Member
    @house-call
    Join Date: 2010
    Post Count: 165

    Agree with all the above.  I would definitely get two books to read, Steve McKnight's "From 0 to 130 properties in 3.5 years."  (Picture of it on the right hand side of this website's homepage)  and Margaret Lomas book "20 must ask questions for every property investor".

    The 2 give quite different but equally logical arguments that certainly opened my eyes in this area, as well as generated enthusiasm to invest, but in a logical way reducing or minimising risks as much as possible, and how to analyse properties more critically.  (ie keep emotion out of it-look at the numbers and end result).

    Problem with paying too much up front and then neg gearing is you are losing a lot of dosh in the increased hope of good capital gain.

    Profile photo of Cathy.GCathy.G
    Participant
    @cathy.g
    Join Date: 2010
    Post Count: 22

    Thanks Pinkboy

    In our case too they said the property they were offering us was the last available in that development.

    Thanks House Call.

    I have just finished reading Steve's books. All he says I agree with especially about negative gearing meaning you are certain to make a loss now for a possible gain later. I have been scouring the internet, the local papers and  driving around the neighbourhood. So far nothing even comes close to passing the tests Steve sets in his 3 second solution (ch 15: 0 to 260+ Properties in 7 Years).

    Cathy

    Profile photo of pinkboypinkboy
    Participant
    @pinkboy
    Join Date: 2010
    Post Count: 49

    These 'developers' always have thier ways to sucker people into thier web.  The way they are able to offer the last property in a stage has some very clever science behind it;

    Scenario:  You get the opportunity to purchase the last property in the stage.  What is so good about this property?  They tell you it is a bargain, as the next stage on offer has prices $10k – $20k higher for the same type of property/land etc. 

    Question to ask these type of 'developers';  'If the properties are going to perform so well, how many do you have in this particular estate?'  The better ones will tell you they flog all the properties off as that is how they destined the development for them to make the reasonable quick buck.  This crew (or the guys I talked to in particular), let me know they had 3,4,5 properties each in the development on hold for them until they can sell enough so they can afford 'thiers'.  Heres the catch – when the next 'sucker' takes the bait above, one of these properties 'on hold' are freed up as the next 'last property in the development'.  Clever giving the potential customer the satisfaction that they have properties in the estate and 'back themselves' and thier development, and make the potential customer all warm and fuzzy!

    Great marketing and fairly foolproof to the untrained eye.  Gotta give some credit for creativity!

    You've doged a bullet, now take this opportunity to do your own research and not let someone 'do all the homework for you'!!!!

Viewing 11 posts - 1 through 11 (of 11 total)

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