Hello,
There is a new estate going up in a new suburb created just outside the town where we live. It is going to be pretty big, will have its own shopping mall, school(s), footy ground, employment opportunities, shopping mall, etc etc.
Anyway, an opportunity has come up whereby we can buy a new display home to be built. We were looking at this as an investment opportunity. It would be built and landscaped and for the first year they will pay us an 8% return to use the house as a display home. Then after that first year it is ours to do what we like, whether we want to sell or put tenants in there or whatever.
I guess what i want to know is if anyone else on here has had any experience before with buying a display home as an investment property and what are the pros and cons. Plus what are your thoughts of buying/building in new estates in general? Is it a good idea and what are the pitfalls to watch for?
Just a bit of background about me. My wife and I own our own home and have built up a bit of equity and are now looking to invest. We have been looking at existing properties around the area and are also looking possibly building an investment house.
Anyway would be great to hear from some people who have any advice or experience doing this.
Thanks in advance
Adnie | Advice Investments
Email MeYou want to look at the pricing carefully and make sure that you are not paying a premium for it.
You also want to make sure that a bank will fund it as a home loan. They may say that i is a commercial loan. However you would be best to check that out with a good mortgage broker.
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
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Yeah i guess one thing to watch for is paying a premium for it. Im guessing that the case would often be you are getting a good return of say 8-9%, but that good return is cut into because you could be paying more than what the house would actually be worth.
Im also keen to know about building in new estates in general too, like not as a display house. Because i have heard that there is not always great capital growth, but then i have also heard they can be a good place to build too.
Adnie | Advice Investments
Email MeYou will have finance restrictions so you will need to look at sub 80% LVR.
TheFinanceShop | Elite Property Finance
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In the main Display Homes are treated with caution when it comes to security as far as lenders are concerned.
There is the odd lender who doesn't have a problem but make sure you are not paying a premium for the property.
Your Broker should be able to give a few options.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
In addition to the above, estimate what the standard rent is for the area so after it is returned to yourselves, you can calculate what type of yield it will offer as it most likely won't be near the 8% you will be receiving initially. Depending on what you find, it might not seem like a good deal then.
Cheers
Tom
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