First Time Investor- New 2Bed Apartment Sydney – Help Appreciated :)

Hi Katie,

Welcome to the forum.

—Meriton–

* One of the largest and most respectable developer; good quality build and on time most of the time.

* Their stock/properties generally priced slightly higher than the market compared to another OTP ( off the plan)- so hence capital growth can take a bit of a hit…

1. Your question " What should I be looking for in an investment apartment"

Depends what your after, every ones situation is different. factors to consider

– Your financial position and capacity

– Experience 

– Risk tolerance

– Support ( family/ financial )

– Short/medium and long term goal

– Comfort level with investing

– Tax

– Capital gain tax/ Land tax

– Where you are currently in your "life cycle" -ie expecting kids? marriage?

– Stability of work

Generally speaking, OTP carries a certain level of risk and i personally consider it an poor investment unless you have some extremely trustable knowledge source of information that advise you the apartment or location is set to increase in value….as it's very common for OTP apartment to lose it's value overtime due to oversupply, environmental factors, market slow down, builders over pricing, over supply of stock in the same development and lastly mass sales/off loading of stock by the builders and another buyers. 

Before considering OTP as your FIRST property- make sure you have a min 15-20% deposit ready to go …now not later + have a stable work history. 

Regards

Michael 

Hi Katie,

First, congrats on considering buying your first IP.

I can't get my head around the apartment idea though, especially in a complex of 300.  No scarcity value.  Guess I just cannot fathom buying an IP with no room for manufactured growth either.

Not to mention your equity will always be at the mercy of the surrounding sales — including the distressed sales.  So when one Owner in that complex has to get rid of their property quickly, guess what happens to the value of your unit? 

We all invest differently, so it's only my 2 cents, but I would be looking for something less than perfect, something you could extend, renovate or develop.  Likely not an apartment in a large complex. 

dgirl

Hi Katie

You talk about using a buyer's agent to negotiate a price. From what I understand, you can't negotiate a price for OTP purchases, the price is set by the developer.

If you are interested in using a buyer's agent, they can help you find a property from the start where you describe what you are after and they provide comments/suggestions based on your discussions.

There is a list of buyer's agents at http://rebaa.com.au/members/ or the good old internet search.

An independent valuation should be accurate. However, at the end of the day, it's the lenders valuation that counts – and that won't be able to occur until the property is complete and ready for settlement. Anything could happen to the market between now and then.

Cheers

Jamie

Here is a quick snap shot on the pros and cons of OTP:

Pros:

1. High depreciation benefits 

2. Able to secure a property today with little deposit and can settle at a much later time say 1 or 2 years

Cons:

1. No guarantee when the property will be finished and normally it never finishes when the developer says it finishes

2. Workmanship is generally poor and you don't see it until its finished

3. Strata starts out relatively low but rapidly increases overtime (as little as 1-2 years)

4. Usually you pay a premium for the stock

5. Valuations are a massive risk when it comes to finance – this is less evident in Kuring gai constructions and more evident in an area like docklands neverthless a risk 

6. Very little room to manufacture CG as it is a brand new dwelling (this to me is actually the biggest bug bear)

Regards

Shahin

It's a much better option – at least that way you can manufacture growth rather than waiting for it to kick in.

Cheers

Jamie