Good morning all,
Is it possible to purchase off the plans with say a 10% deposit, let the property value increase over 12 months during construction and then sell the contract to someone else for a higher value? What is the term for this and is it just a matter of having a good solicitor?
Will a bank give a loan for this 10% or is cash the only means of achieving this?
Has anyone done this and could you help me do it?
Thanks
Id say that strategy is more akin to gambling. Most of the people on here would agree. Thats a quick way to get yourself into some financial trouble and not a investing model i would use.
10% deposit can come from – equity which would be in the form of a loan against other property and assets you own
or cash
Or a deposit guarantee (which is backed by equity in other assets)
Its either you get you solicitor and conveyancer to use a deed of assignment or a nomination form having signed the property your name and or nominee And they agreed to pay you some form of payment for being the initial offerer. Or you have to settle on the property yourself which means getting finance and at 10% deposit you would have to Pay LMI costs as well unless you put in further money.
Nothing in life is free or easy and that strategy is a hit and hope play.
If you pay less than market value initially and the market remains steady or increases then you may gain some equity. Your are essentially at the mercy of the end valuation. It is common for the end val to come in less than the purchase price so you would need reserve funds to make up the difference.
The property would have to settle in your name as you would likely loose your 10% deposit if transferred to some one else. The initial deposit would be cash or equity loan from another property or a combo of the two.
My advice would be to implement a more viable strategy.
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
Wilko and FMS are bang on the mark.
High risk strategy, added to which most developers factor in future growth- ie: if the project isn't due for completion for 18-24monhs, the purchase price usually reflects what growth would have accrued so you are not paying today's market value, you are paying anticipated market value in 2 years. Hence why valuations usually don't stack up come settlement and you as the purchaser are left having to put more funds in to balance out your LVR.
Also, the various sales crew selling these places get a decent backend commission courtesy of the developer; another cost generally factored into the purchase price that you as the subsequent purchaser are covering.
Ask most of the key players on this forum- the guys that have been in the game for many many years and have accrued a significant portfolio. You will be hard pressed to find any of them using this strategy.
Should you need further proof- Just search OTP on this forum and see how many horror stories pop up.
cubster_2 wrote:Good morning all,Is it possible to purchase off the plans with say a 10% deposit, let the property value increase over 12 months during construction and then sell the contract to someone else for a higher value?
Speak to a good solicitor about the legalities and the costs involved. Personally – I think it's a very risky strategy. You need to tread carefully with anything involving OTP.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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