Dear All
I am planning on getting into the investment game very soon, and have plans to meet with an investment company next week. I would love some advice on the following
Buying off the plan (i.e. when there is a couple of years to go before built). Is this a good idea in the current econmic climate?
The deposit bond which is payable at the beginning to the bank… Is this a negotiable amount?
Is it better to buy a newer apartment (to start of the invesment portfolio) for tax deduction reasons.. i.e. More to claim on building and fixtures/fittings?
Is it a good idea to buy my first property now, or wait, as per the last newsletter that Steve has sent? (investment rates increasing) Is steve suggesting we wait to buy a property until June 08?
Thank you in advance for your assistance
NixHi Nix
I am going to make the assumption that the off the plan proerty you intend to buy is in a major city.
Buying off the plan in this situation can mean that you will benefit from the capital growth the property will see between now and when it is completed. The price you are buying it for is at today's market value, but you do not need to pay the settlement amount until the settlement date.
To understand how capital growth works you need to realise that there exists a Property Cycle. The value of properties in major capital cities in past years since 1960 has increase dramaticlly every 7 – 10 years. The last property boom that occured wsa in 2004 at which time properties in major cities around Australia say the greatest number of sales and therefore capital growth. At present we are just coming out of the mid point in the current cycle which means that many properties will see good growth until 2010/11. Now is the perfect time to buy.
In many cases property in major cities around Australian has doubled in value every 7 years.A deposit bond is not negotiable. Lending institutions require that you have 3 times the bond amount in available funds before they will issue your deposit bond.
The tax benefits you gain from a new investment, ie Building and fitting depreciation, plus the expenses involed in the property, ie. property management fees, body corporate, rates etc are all tax deductions. An Accountant can help you to fill out and submit a Tax Variation Form that allows you to pay a reduced rate from your weekly income, this provides you with increased cash flow to help service your loan.
I am sorry I have not read Steve's newsletter so I can't really comment on that.
I hope this information is useful and please do get professional advice.
My office is in Brisbane
Read heaps of articles on the net and magazines and then read some more. An advisor is a good idea but also do your homework on them aswell. If your looking to invest for the long haul invest sooner rather than latter but do your homework first
Thank you for both of your advice. I really do appreciate it. Its a bit of a minefield when you first start your property portfolio. I have an appointment to meet with Diverse (i saw the name from reading through this website), they will hopefully be able to point me in the right direction for financial advice.
pjk1966 wrote:Hi NixI am going to make the assumption that the off the plan proerty you intend to buy is in a major city.
Buying off the plan in this situation can mean that you will benefit from the capital growth the property will see between now and when it is completed. The price you are buying it for is at today's market value, but you do not need to pay the settlement amount until the settlement date.
To understand how capital growth works you need to realise that there exists a Property Cycle. The value of properties in major capital cities in past years since 1960 has increase dramaticlly every 7 – 10 years. The last property boom that occured wsa in 2004 at which time properties in major cities around Australia say the greatest number of sales and therefore capital growth. At present we are just coming out of the mid point in the current cycle which means that many properties will see good growth until 2010/11. Now is the perfect time to buy.
In many cases property in major cities around Australian has doubled in value every 7 years.A deposit bond is not negotiable. Lending institutions require that you have 3 times the bond amount in available funds before they will issue your deposit bond.
The tax benefits you gain from a new investment, ie Building and fitting depreciation, plus the expenses involed in the property, ie. property management fees, body corporate, rates etc are all tax deductions. An Accountant can help you to fill out and submit a Tax Variation Form that allows you to pay a reduced rate from your weekly income, this provides you with increased cash flow to help service your loan.
I am sorry I have not read Steve's newsletter so I can't really comment on that.
I hope this information is useful and please do get professional advice.
My office is in Brisbane
Phillip Kelly
Property Investment AdvisorLic. Qld. Real Estate Sales Person
Yes, please do get professional advice, because the above is pure uninformed rubbish. And you call yourself a 'property investment advisor'? Shet a brick!
Nix, please follow this advice:
- Don't sign anything. You're going to be exposed to high pressure, underhand sales tactics from this company when you visit them. Run any offers they push on you past some experienced investors before you buy. Even float them here and somersoft for advice
- Know the risks. There are major risks associated with this kind of investment. Primarily, you can find yourself unable to finance the deal at completion (due to tighter lending standards or declines in valuation) and be forced to lose your deposit – or worse: persued through the courts for losses if you fail to buy. This happened to hundreds of apartment buyers in Melbourne in 2004 and 2005. And more recently to people seeking help on this forum.
- Don't sign anything.
The 'deals' you will get on OTP apartment purchases, particularly those sold by companies with 'investment' in their name or job description are almost invariably BAD deals. Seriously.
Cheers, F. [cowboy2]
Nix,
The deposit bond/off-the-plan scenario got a lot of people into a lot of trouble (particularly) in Docklands some years ago. "Investors" looking to flip the property on completion or (worse) on-sell the contract prior to settlement found themselves holding properties worth less than they paid and in the unexpected position of having to settle deals they didn't intend to. This was largely due to significant amounts of stock coming on to the market at the same time and the high % of the "buyers" who all had the same plan – flip.
In any number of cases they were unable to settle and the developers called in the bond. It is worth remembering that if you fail to settle you will owe the insurer the $.
The question I would ask is whether you are looking to invest or speculate. That is, is your expectation a quick return your goal or a longer term hold. If the former, I wouldn't consider it an appropriate first time play.
FWIW
Yossarian wrote:Nix,
The question I would ask is whether you are looking to invest or speculate. That is, is your expectation a quick return your goal or a longer term hold. If the former, I wouldn't consider it an appropriate first time play.Now that is good advice! You got a license for that Yossarian?
Hi Nix,
I agree with Foundation… Don't sign anything!
Is the deposit negotiable? YES. EVERYTHING IS.
I recently purchased a townhouse of the plan and neg. from 5% to 3%Yes, you can make money from off the plan… but remember most of the money is normally made by the developers.
Especially be weary of the High rise developments…
If you can get a little townhouse or something with a bit more land content in the same good area, you are always miles ahead.I'm sure people here can help out a bit more if you advise:
How much are the units selling for?
How many units in the complex? (is it a staged development)
do you know the builders background?
have they advised the expected "strata / body corp fees?
what deposit are they asking for?
have they sold many units?
is there a strong rental return in the area currently?
is money being invested in the area?
that is, infrastructure: schools, transport, shopping centres, etc…
What are WAGES like in the area?
Do you see people moving TO or FROM this area over the next 10 years …?
And ofcourse, what area are they selling? (if you don't want to say… just advice if it's cap city or not.)cheers
Yes. off-the plan is very bad for buyers. currently I got a deal signed 2 years to settle in the near future. You do not know exactly when you need settle while you wait for the completion. Furthermore, you do not know whether the bank will finance it and how much loan the bank is willing to give you. For current properties, you could know whether you get finance in a few days and that give you certainty.
Believe me, Developers and their sales people also tend to overprice off-the-plan properties as well.
Remember, never buy off-the-plan.
You mention that u r going to c an "Investment Company".
Property investment companies can b very dangerous.
They are renowned for selling overpriced properties.
Not a lttle overpriced, VERY overpriced.
To balance your thinking consider visiting http://www.jenman.com.au
He means well as a consumer advocate.
He recently exposed an group called Insight (search for 'Insight Group" article from his site).
Massive overpricing scam. And they sell many properties over many years to unsuspecting targets.
U don't want yr first experience to be negative.
There is no mad rush. Do yr homework, avoid Investment companies, get independent valuations and use yr own solicitor.
Good luck
foundation wrote:Yossarian wrote:Nix,
The question I would ask is whether you are looking to invest or speculate. That is, is your expectation a quick return your goal or a longer term hold. If the former, I wouldn't consider it an appropriate first time play.Now thatis good advice! You got a license for that Yossarian?
Hi Foundation,
Though I just noted the typos *d'oh*, beyond the "residential property investment as low-risk magic pudding" views that sometimes prevail on this site, I am always amazed at the extent to which speculation and investment are confused. The amount of advice to first-timers which really amounts to encouraging asset speculation scares the bejebus out of me!
Extraordinary claims require extraordinary evidence and it strikes me that some of the observations that pepper this forum fall into that category and should be put to the test
Believe me, Developers and their sales people also tend to overprice off-the-plan properties as well.
Remember, never buy off-the-plan.
This is a bit too much of a gernalisation, people do make money from off-the-plan sales on occasions.
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