G’day!
After researching for a while, I think I have found my first deal. It is land in a regional area of NSW. The developer is selling the 2nd/3rd Stages currently (I believe there are 8 stages in total).
The settlement period for this deal is 12months. The developer has had the land sub-division approved by the council and is yet to file the DA for the roads and infrastructure.
Talking to the town planner it seems this development is quite prestigious (compared to other 2 in the surrounding area) as it over looks a golf course.
I have some questions and would like your insights on things to look out for:
1. How do I know if I’m paying an inflated price for these lots?
2. Are regional NSW areas good places to begin investing?
3. Buyer’s Agents? Please explain?
4. Any other help info would be great.
Appreicate your help,
akyboy [8D]
hi akyboy
sorry before i answer i have some questions for you
what is your goal with this deal ?
i assume capital growth ?
is it you plan to build on the land, sell the land ? when do you want to sell. how much does the land cost you to own.
are you getting finance what sort interest rates,
westanG’day Westan,
> what is your goal with this deal ?
Primarly goal is for captial growth with hopes of “flipping” the property near settlement. However, 3 months before settlement I will have to reassess and see if it will be profitable for me to build on this land – maybe 4/5 townhouse or duplex’s.
> how much does the land cost you to own.
The lots are currently priced from 130-250K. I’m looking at some lots which are priced around 150K. I was thinking of purchasing two adjacent lots.
> are you getting finance what sort interest rates
We need 6K to exchange contracts. We would definitely need finance, but I haven’t looked into this yet as I’m still investigating this deal.
Is 5.8% standard variable p.a. a good rate[?]
Tx,
akyboy
Have you looked into getting a deposit bond to stop you from having to pay the deposit up front? Also, are you aware that since you are buying off the plan you can delay the payment of stamp duty for up to 12 months or until settlement (whichever is less). This applies in the ACT and I’m pretty sure it’s the same for NSW.
Hi luckone,
No, I haven’t, but now that you mention it, I will definitely look into to it. Are there any drawbacks from using deposit bonds?
I believe stamp duty is payable on settlement, which is in 12 months.
akyboy [
]hi akyboy
i gather you pay 6k now but settle in 12 months. if it hasn’t gone up in price and you settle then you need to come up with the 150k ???
one possible outcome is you buy it with finance, you hope that it goes up in value by at least the interest rate plus rates for you to break even.
personally i don’t like land because there is no income coming in, in this deal you are totally a capital gains play. at least if it had a house you would get some money to help cover costs.
another issue to consider is finance. you say 5.8% that sound a very good rate but i’d be surprised if you could get that on land (without extra security like your home). it will also mess up your servicability for future lending, and you may not be able to borrow any more cash (depends on your income ?).
sorry for being negative, the deal might be ok but i’d be careful. i did try to buy land last year but was beaten too it, in this case i was going to subdivide it and resell for a huge profit[xx(].
all the best
westanJust stating the obvious, but getting units through council is a lenghty process,assuming there is no restrictions in the section 32. New estates often have several restrictive covenants outlining what you can and cannot do with the land. Yes you can delay stamp duty but if you sell the land within 12 months dont forget about capital gains. I have noticed in areas that where land takes 12 months or more to develope it increases in value and as land is fairly scarce titled land is most valuable. This has certainly been the trend in and around Melbourne’s regional areas. I dont know if this trend will continue of course, but good luck! Oh, a buyer’s agent is a real estate agent working for the purchaser and will attend auctions and so forth to negotiate the best deal for the buyer, as a seller’s agent works for the vendor and negotiates the best sale price for the vendor.
GraceyHi Akyboy
I have a client that has become a millionaire ‘overnight’ by doing something similar. Buy land with a deposit bond or a negotiated small deposit and then sit back and wait. This guys land has more than doubled in about 12 months-and he had many blocks.
Are you looking at an area near the coast? it seems anywhere on the coast is booming (but this doesn’t mean it will continue to).
At or near settlement you could sell a few blocks and or settle using loans based on valuation. if it has grown in price you could even get 100% finance.
In NSW I think stamp duty is payable within 3 months of exchange of contracts.
If you sold, the ATO treats a sale to have occurred when contracts are exchanged, so if you have a 12 months to settlement you may get the 50% discount on CGT.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Akyboy
I have a client that has become a millionaire ‘overnight’ by doing something similar. Buy land with a deposit bond or a negotiated small deposit and then sit back and wait. This guys land has more than doubled in about 12 months-and he had many blocks.
Are you looking at an area near the coast? it seems anywhere on the coast is booming (but this doesn’t mean it will continue to).
At or near settlement you could sell a few blocks and or settle using loans based on valuation. if it has grown in price you could even get 100% finance.
In NSW I think stamp duty is payable within 3 months of exchange of contracts.
If you sold, the ATO treats a sale to have occurred when contracts are exchanged, so if you have a 12 months to settlement you may get the 50% discount on CGT.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I was thinking area wise it sounds like bathurst??? am i rite???
just a guess but!!! hope it goes well for u akyboy, 5.8% as a variable rate sounds very low to be honest, perhaps its just a honeymoon rate? not saying ur wrong but… just thinking while im typing!
Well, hope it goes as planned….
Jason
And be sure to call council about ur plans for the land… many new subdivisions in regional areas do not allow for townhouse / villa development…
What did the previous stages sell for? how long did they take to sell??
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