Hi to all out there ! I am new to property investment having lead a bit of a nomadic existence, but am now considering a purchase. Looking at an 'off the plan' investment unit. Basically looking for peoples thoughts on if good option or not and if so what regions may be good.
HELP with 'off the plan' investment property
- Thread starter shane_indo
- Start date
Shane,
Welcome to the forum.
You must have been wandering a fair bit to consider buying OTP in the current market
Seriously, OTP properties are generally higher risk than buying an actual building.
You are making a commitment now at a certain price with no current cash flow and the hope of a future profit/cashflow. You are relying on the developer fulfilling their promise to deliver the property in the condition as described. Sure you may have legal recourse if the developer reneges, but that costs you even more to follow through with.
OTP lending has tightened considerable in the last year and may well tighten further - already there are people out there having problems meeting commitments as banks won't lend as much as they were hoping to borrow and price growth has been constrained but to large numebrs of similar properties being built nearby (referring to OTP units).
Yes there are decent OTP propositions, and there are a few forumites still investigating these prospects, but I believe on the whole these are experienced property investors with strong fallback positions.
Take a good long look at the market before committing to an OTP purchase and do plenty of research to confirm that it is the best way to spend your money.
And remember - even though there appears to be a low entry cost to buy OTP - you have to pay the full price in the end....is the price the one you would want to pay for that style of property?
Cheers,
Aceyducey
Welcome to the forum.
You must have been wandering a fair bit to consider buying OTP in the current market
Seriously, OTP properties are generally higher risk than buying an actual building.
You are making a commitment now at a certain price with no current cash flow and the hope of a future profit/cashflow. You are relying on the developer fulfilling their promise to deliver the property in the condition as described. Sure you may have legal recourse if the developer reneges, but that costs you even more to follow through with.
OTP lending has tightened considerable in the last year and may well tighten further - already there are people out there having problems meeting commitments as banks won't lend as much as they were hoping to borrow and price growth has been constrained but to large numebrs of similar properties being built nearby (referring to OTP units).
Yes there are decent OTP propositions, and there are a few forumites still investigating these prospects, but I believe on the whole these are experienced property investors with strong fallback positions.
Take a good long look at the market before committing to an OTP purchase and do plenty of research to confirm that it is the best way to spend your money.
And remember - even though there appears to be a low entry cost to buy OTP - you have to pay the full price in the end....is the price the one you would want to pay for that style of property?
Cheers,
Aceyducey
Do some due diligence.
Read every post on this forum. I have found that typically, a property investor gets real good at doing one type of thing, then retires. Find a niche and pump it for all its worth.
Off the plan purchases in Units can STILL make you money, despite recent press.
Things I look out for .. (not in any particular order)
1. Number of units in the development... You generally do NOT want to invest in large developments, I prefer under 40 units per development..
2. Land content... Your purchasing dollar buys you a percentage of the land that the development is on. There are various theories out there, but look for 30% land value or more. The developer and selling agents should be up front with land values. If not, move on.
3. Get in on the first stage, or first release. Look for developments with mutliple releases .. generally the second stages are sold for more than the first, so when you revalue later its more likely you will get an instant equity gain.
4. Go and check out some of the developers handiwork .. look for quality construction, fittings, aesthetics etc.
5. Target market... 1BR? 2BR? Car spaces? storage? bathrooms? etc .. check out the area the development is occurring in, and check out the demographics, what is in demand, and what is hard to rent out. Real estate agents can help with this info, along with a bit of legwork.
6. How to value your purchase? Use navras rental reality calculation for a good guide as to whether the developer is asking for too much of your $. Do not go by most recent sales, or most recent median, these figures can be used by the sales people to trick you.
7. Amenities... Swimming pools and lifts are notoriously expensive to upkeep. I avoid developments with these, as they can blow out your strata fees, sinking funds are larger etc. I Look for pleasing landscaping (possibly with shared BBQ area - hey, we're all aussies!), security system, broadband connection.
8. Location... This is up to your preference, most people prefer to live close to, but not no top of .. private schools, other schools, thriving shopping strips, transport, beach, sporting facilities etc
Do this 50+ times and you will be an expert: you will have spoken to all types of people, had time to form an informed opinon on the property market, sorted out in your head what to look for etc. You may pass up the odd good deal at first, but you will more than make up for this in the long run.
Re-read every post on this forum. Lol, theres alot of good stuff here. I'm constantly re-finding gems in old posts.
JJ.
Your decisions are your own, these are my opinions.
Read every post on this forum. I have found that typically, a property investor gets real good at doing one type of thing, then retires. Find a niche and pump it for all its worth.
Off the plan purchases in Units can STILL make you money, despite recent press.
Things I look out for .. (not in any particular order)
1. Number of units in the development... You generally do NOT want to invest in large developments, I prefer under 40 units per development..
2. Land content... Your purchasing dollar buys you a percentage of the land that the development is on. There are various theories out there, but look for 30% land value or more. The developer and selling agents should be up front with land values. If not, move on.
3. Get in on the first stage, or first release. Look for developments with mutliple releases .. generally the second stages are sold for more than the first, so when you revalue later its more likely you will get an instant equity gain.
4. Go and check out some of the developers handiwork .. look for quality construction, fittings, aesthetics etc.
5. Target market... 1BR? 2BR? Car spaces? storage? bathrooms? etc .. check out the area the development is occurring in, and check out the demographics, what is in demand, and what is hard to rent out. Real estate agents can help with this info, along with a bit of legwork.
6. How to value your purchase? Use navras rental reality calculation for a good guide as to whether the developer is asking for too much of your $. Do not go by most recent sales, or most recent median, these figures can be used by the sales people to trick you.
7. Amenities... Swimming pools and lifts are notoriously expensive to upkeep. I avoid developments with these, as they can blow out your strata fees, sinking funds are larger etc. I Look for pleasing landscaping (possibly with shared BBQ area - hey, we're all aussies!), security system, broadband connection.
8. Location... This is up to your preference, most people prefer to live close to, but not no top of .. private schools, other schools, thriving shopping strips, transport, beach, sporting facilities etc
Do this 50+ times and you will be an expert: you will have spoken to all types of people, had time to form an informed opinon on the property market, sorted out in your head what to look for etc. You may pass up the odd good deal at first, but you will more than make up for this in the long run.
Re-read every post on this forum. Lol, theres alot of good stuff here. I'm constantly re-finding gems in old posts.
JJ.
Your decisions are your own, these are my opinions.
OTP isn't so bad. There's nothing wrong with buying a brand new sparkling unit I think Aceyducey is referring to deposit bonds in his answer.
Jum- very comprehensive answer there. Shane, make sure you get an independent valuation. Some of the developer's valuers can see values in quite a different light than others
Jum, also, avoid buying "generic" or what is considered to be "b-grade" apartments in over-supplied areas (some of our state capitals have units all over one area- making them look like big housing commission estates). You could buy an OTP in a market with a good location (the old rule applies more than ever), and perhaps with some outstanding features. If everyone in the OTP building decides to sell at once, then you'll have a chance at decent resale.
Don't rely on huge capital gain on purchase price- a lot of the values are set by developers with profits built in- often huge profits.
You'll probably also be heavily negative gearing in your purchase. Guaranteed rentals can at times be overinflated and subsidised by the developer- this will be added into your initial purchase cost.
Just don't get in over you head and you'll be right
Cat
I think Aceyducey is referring to deposit bonds in his answer. Jum- very comprehensive answer there. Shane, make sure you get an independent valuation. Some of the developer's valuers can see values in quite a different light than others
Jum, also, avoid buying "generic" or what is considered to be "b-grade" apartments in over-supplied areas (some of our state capitals have units all over one area- making them look like big housing commission estates). You could buy an OTP in a market with a good location (the old rule applies more than ever), and perhaps with some outstanding features. If everyone in the OTP building decides to sell at once, then you'll have a chance at decent resale.
Don't rely on huge capital gain on purchase price- a lot of the values are set by developers with profits built in- often huge profits.
You'll probably also be heavily negative gearing in your purchase. Guaranteed rentals can at times be overinflated and subsidised by the developer- this will be added into your initial purchase cost.
Just don't get in over you head and you'll be right
Cat
Hiya,
I am temporarily over from London and have used the time to look at opportunities over here. I have purchased off-plan for several reasons:
- I have found a development which is unique (in terms of location and set-up)
- I can (hopefully) enjoy substantial capital growth with only 10% deposit
- I get to choose the apartment I want
- I can put the apartment in a 'pool' with others where income is shared, bookings (as holiday rental) is all sorted, as is cleaning etc (a bonus when I'm back in sunny England)
- I can use the apartment when I come over to visit
The location is in a beautiful town called Mandurah, just outside Perth, which is a rapidly growing destination for local and international tourism, as well as commuters to Perth. It is right on the beach and next to a new marina. The lifestyle is everything that us Brits imagine Australia to be (and I've seen a fair bit of Aus to know it isn't always the reality!)
Happy to pass on details.
Nick
I am temporarily over from London and have used the time to look at opportunities over here. I have purchased off-plan for several reasons:
- I have found a development which is unique (in terms of location and set-up)
- I can (hopefully) enjoy substantial capital growth with only 10% deposit
- I get to choose the apartment I want
- I can put the apartment in a 'pool' with others where income is shared, bookings (as holiday rental) is all sorted, as is cleaning etc (a bonus when I'm back in sunny England)
- I can use the apartment when I come over to visit
The location is in a beautiful town called Mandurah, just outside Perth, which is a rapidly growing destination for local and international tourism, as well as commuters to Perth. It is right on the beach and next to a new marina. The lifestyle is everything that us Brits imagine Australia to be (and I've seen a fair bit of Aus to know it isn't always the reality!)
Happy to pass on details.
Nick
Nick,
There are some disadvantages to the approach you've taken.
To name two, pooled income means that you'll get a much lower return from the property then you would over a let property.
Also you may well find that the management fees are very high.
These investments are basically designed to make the developer a nice profit on sale & great cashflow from the management fees.
They're not set up to be good investments.
However if it suits what you want, fine.
Cheers,
Aceyducey
There are some disadvantages to the approach you've taken.
To name two, pooled income means that you'll get a much lower return from the property then you would over a let property.
Also you may well find that the management fees are very high.
These investments are basically designed to make the developer a nice profit on sale & great cashflow from the management fees.
They're not set up to be good investments.
However if it suits what you want, fine.
Cheers,
Aceyducey
I was sceptical, but the return is guaranteed for 1 year and previous examples from the company are showing 5 - 6% net return.
What level of return do you consider acceptable (I am more interested in the capital growth potential)?
Nick
What level of return do you consider acceptable (I am more interested in the capital growth potential)?
Nick
Hello Nick and welcome to Aussie
Serviced Holiday Apartments with shared income derived from the management of the units by a caretaker will only be funded by a very few lenders.
This is distinct from Serviced Apartments, which usually have a long lease to an operating tenant which pays the rent whether the apartment is occupied or not. Not many lenders will fund these either as again they are a specialist type of property.
This is because the properties are being used as commercial for short term accommodation and often the planning permit prohibits occupation of a more usual residential nature.
Depreciation will probably run at 25 years x 4% per annum, whereas residential property is the other way around, 40 years x 2.5% per annum.
Estimating income is quite different from having a separate enforceable lease, which provides an income which can be relied on. Lenders are wary of estimates.
Notwithstanding lenders limitations, if you can provide equity in another property, or don't need to have a loan above 60 - 65% of the purchase price, this type of apartment can produce good yields and good capital growth.
Some complexes of this kind have shown very good capital gain during recent years, primarily because residential rentals have fallen to around 4.5% gross per annum, which makes serviced holiday apartments look very good in the short term.
While you are in Perth, ask around in anticipation of your borrowing requirements. You would be wise to track down your source of funds well in advance of settlement.
www.iafba.com.au
www.homeloanaustralia.com.au
are based in Perth although provide broker services Australia wide.
The location of your development certainly sounds wonderful. I hope it all goes well for you, and you enjoy many happy holidays here
Cheers
Kristine
.
Serviced Holiday Apartments with shared income derived from the management of the units by a caretaker will only be funded by a very few lenders.
This is distinct from Serviced Apartments, which usually have a long lease to an operating tenant which pays the rent whether the apartment is occupied or not. Not many lenders will fund these either as again they are a specialist type of property.
This is because the properties are being used as commercial for short term accommodation and often the planning permit prohibits occupation of a more usual residential nature.
Depreciation will probably run at 25 years x 4% per annum, whereas residential property is the other way around, 40 years x 2.5% per annum.
Estimating income is quite different from having a separate enforceable lease, which provides an income which can be relied on. Lenders are wary of estimates.
Notwithstanding lenders limitations, if you can provide equity in another property, or don't need to have a loan above 60 - 65% of the purchase price, this type of apartment can produce good yields and good capital growth.
Some complexes of this kind have shown very good capital gain during recent years, primarily because residential rentals have fallen to around 4.5% gross per annum, which makes serviced holiday apartments look very good in the short term.
While you are in Perth, ask around in anticipation of your borrowing requirements. You would be wise to track down your source of funds well in advance of settlement.
www.iafba.com.au
www.homeloanaustralia.com.au
are based in Perth although provide broker services Australia wide.
The location of your development certainly sounds wonderful. I hope it all goes well for you, and you enjoy many happy holidays here
Cheers
Kristine
.
Nick,
Did you look at returns for similar properties not owned by this company?
5-6% return is good enough compared to other yields in Sydney & Melbourne to get new investors to buy in, (plus you get to stay in Perth free) but not good enough for most experienced investors unless there's a very good CG case.
I can live with that level if the CG is there....right now I certainly aren't buying properties on expectation of CG for the next few years - only for high cashflow. The places we've been looking at recently are at the 10%+ plus level, so at least double that level (but very limited CG potential, they're cashflow plays).
Cheers,
Aceyducey
Ahhh, the old neg geared vs pozz geared discussion
I've changed my strategy somewheat and am sitting in the middle- somewhere between the highly pozz geared dump and the highly neg geared mansion. I'm now looking for mid-range properties- ones that I would be happy to live in- that return about 7-8%.
I figure if I buy post-1982 properties and can get the depreciation allowances, and get places that are fairly low maintenance, then I am finding my own levels of "value" in purchases.
Pozz geared pros sometimes (in 2004- not with the recent boom) are limited in CG, whereas neg geared are limited in rental income. So now I combine the two- reasonable income, plus other attributes, such as location.
Cat
I've changed my strategy somewheat and am sitting in the middle- somewhere between the highly pozz geared dump and the highly neg geared mansion. I'm now looking for mid-range properties- ones that I would be happy to live in- that return about 7-8%.
I figure if I buy post-1982 properties and can get the depreciation allowances, and get places that are fairly low maintenance, then I am finding my own levels of "value" in purchases.
Pozz geared pros sometimes (in 2004- not with the recent boom) are limited in CG, whereas neg geared are limited in rental income. So now I combine the two- reasonable income, plus other attributes, such as location.
Cat
This forum really is useful, thank you. It is great to read stuff other than in the press.
I have checked out other developments within the same group, and the occupancy levels are around 75% with approx $160 per night rate (gross). The capital growth (based on Valuer General info) appears to be around 13% p.a., based on the last 3 - 6 years.
It is also worth noting that all owners have a choice as to whether they enter the pooled rental scheme, and there is also residential zoned property available within the development (which can be put in the pool if you don't want to live in for a given period - best of both worlds for international investors?)
Thank you for the useful financial advice, although I am financing from the UK where interest rates are a little more palitable. As a comparison, the doom merchants have been shouting for the last 2 years over there, and of course might still be proved right in the short term but have also presumably missed out on 20% p.a. growth over the last 2 years!
I know it is useful to be cynical, but there are different ways to 'skin a cat'! Just because this isn't your (whoever you may be!) way doesn't mean it doesn't work. I am sure there are horror stories in EVERY area of PI, and if everyone concentrated on those it would be a very static market (I am old enough to remember the horrors of the crash in England early nineties, which I presume also happened here?).
Nick
I have checked out other developments within the same group, and the occupancy levels are around 75% with approx $160 per night rate (gross). The capital growth (based on Valuer General info) appears to be around 13% p.a., based on the last 3 - 6 years.
It is also worth noting that all owners have a choice as to whether they enter the pooled rental scheme, and there is also residential zoned property available within the development (which can be put in the pool if you don't want to live in for a given period - best of both worlds for international investors?)
Thank you for the useful financial advice, although I am financing from the UK where interest rates are a little more palitable. As a comparison, the doom merchants have been shouting for the last 2 years over there, and of course might still be proved right in the short term but have also presumably missed out on 20% p.a. growth over the last 2 years!
I know it is useful to be cynical, but there are different ways to 'skin a cat'! Just because this isn't your (whoever you may be!) way doesn't mean it doesn't work. I am sure there are horror stories in EVERY area of PI, and if everyone concentrated on those it would be a very static market (I am old enough to remember the horrors of the crash in England early nineties, which I presume also happened here?).
Nick
Hi Nick and Shane,
I love discussing this topic on OLD vs New/OTP.
As mentioned in a similar post previously. I will ramble on a little more on the disadvantages and advantages between OTP/New vs OLD just to give you some idea and a clearer understanding between the two.
At the end of the day it comes down to your personal preference and what you want. Do you want capital growth or good cash flow? Its either one or the other. I have a personal preference for older properties because they are in established suburbs and offer excellent to good capital growth.
Older properties in established suburbs are good because there are already train lines, shopping centres, doctors and all those other amenities that people love to be near. If you can buy a new property in an establised suburb, if there is land available depending which capital city you are in, then sometimes you can get the best of worlds.
The off the plan ones are the hardest hit - simply because they bet on the market going up so purchased off the plan and think that they can on-sell it for a large profit later on. The "bigger fool" principle. This happened before in the sharemarket, and it's now happening on a bigger scale in the off-the-plan market. Now the biggest fools are the ones left holding the baby which they can't offload.
OTP/New properties have higher taxation benefits. If you are after good cash flow then buying new properties can be for you but don’t expect any capital growth for the next few years because the profit is taken up by the developer and it is the prices of the other properties in that development that set the price for your unit. The longer they take to sell those units or houses, the longer the price is established for that suburb. If it takes 6 months for them to sell all the units in the development, that price is going to be set for a couple of years. What can also happen with new property is that the developers can get a little bit enthuastic towards the end and slash the price of a few of their last ones, just to get some cash flow going. They can do it at the other end as well. There is a whole host of reasons why there is lower capital growth potential.
Financing the project for OTP can also be difficult.
If you are planning to buy these type of investments, plan not to sell and hold onto to them looooooong term. There are 2 types of property that are subject to crashes. The first is prestige and the second is off the plan, brand new property. They are subject to delay in sales.
Most time you have a restricted choice of area, particulary in a city like Sydney or Melbourne which are heavily overdeveloped in the near city areas. Not so much of an issue in Brisbane although it is starting to get that problem as well. Perth not sure about.
If you buy new property off the plan they can more vulnerable to economic ups and downs within the market than those already investing in the established sector. Trying to find out the correct market value for established properties is easier because transaction histories are more readily available. You may also find it difficult to visualise what a new building and apartment will look like. Builders reserve the right to make changes that may have a material impact on any aspect of he buildings attractiveness and resale value. Under the terms of contract the builder and the developer may be permitted to alter the specifications and dimensions of the building and individual apartments without allowing purchasers the right to withdraw from the contract.
Established properties perform better in terms of capital growth. You dont even have to renovate them, they're on a continual growth path. You can even accelarate the equity by simply adding value if unrenovated, simple cosmetic touch ups for example, which means you dont have to wait for the market to do it for you.
Take for example 1960's 1970's apartments, they have become increasingly popular partly as a result of the very strong capital growth particularly in inner urban areas over the last few years. Their manageable size, low maintenance, proximity to the CBD together with the fact that many are located in blue-ribbon streets of highly regarded suburbs, are among the factors which have fuelled demand. As the recent exponential capital growth has begun to return to more normal levels, specific examples are starting to show the potential to become classics of the period. Potential classics tend to emerge as a typical capital growth in a property cycle returns to more normal and sustainable levels.
As the reaslisation dawns that the CBD does not offer the same quiet enjoyment and residential amenity that most inner suburbs do, many will be attracted to less expensive apartments of the 1960's and 1970's that offer comparatively affordable body corporate fees, better capital growth and nestled amongst more expensive homes well serviced by infrastructure and residential amenities. Even better and more comfortable for intending and existing purchasers, the current prices and future value for the 1960's and 1970's apartments are firmly rooted in the forces of underlying demand rather than the an artificially set asking prices commonly associated with new developments and apartments bought off-the-plan.
If you are really pressed on time or whatever or if you are a PAYE earner and you want the minimum possible cost of owning property, then new property is possibly the best way to go. However, if you want capital growth then older property is the best way to go.
It doesnt mean that buying a new property is a bad investment, it just a different type of investment.
The choice is yours, but make sure you have done your research.
Good luck!
AJK
I love discussing this topic on OLD vs New/OTP.
As mentioned in a similar post previously. I will ramble on a little more on the disadvantages and advantages between OTP/New vs OLD just to give you some idea and a clearer understanding between the two.
At the end of the day it comes down to your personal preference and what you want. Do you want capital growth or good cash flow? Its either one or the other. I have a personal preference for older properties because they are in established suburbs and offer excellent to good capital growth.
Older properties in established suburbs are good because there are already train lines, shopping centres, doctors and all those other amenities that people love to be near. If you can buy a new property in an establised suburb, if there is land available depending which capital city you are in, then sometimes you can get the best of worlds.
The off the plan ones are the hardest hit - simply because they bet on the market going up so purchased off the plan and think that they can on-sell it for a large profit later on. The "bigger fool" principle. This happened before in the sharemarket, and it's now happening on a bigger scale in the off-the-plan market. Now the biggest fools are the ones left holding the baby which they can't offload.
OTP/New properties have higher taxation benefits. If you are after good cash flow then buying new properties can be for you but don’t expect any capital growth for the next few years because the profit is taken up by the developer and it is the prices of the other properties in that development that set the price for your unit. The longer they take to sell those units or houses, the longer the price is established for that suburb. If it takes 6 months for them to sell all the units in the development, that price is going to be set for a couple of years. What can also happen with new property is that the developers can get a little bit enthuastic towards the end and slash the price of a few of their last ones, just to get some cash flow going. They can do it at the other end as well. There is a whole host of reasons why there is lower capital growth potential.
Financing the project for OTP can also be difficult.
If you are planning to buy these type of investments, plan not to sell and hold onto to them looooooong term. There are 2 types of property that are subject to crashes. The first is prestige and the second is off the plan, brand new property. They are subject to delay in sales.
Most time you have a restricted choice of area, particulary in a city like Sydney or Melbourne which are heavily overdeveloped in the near city areas. Not so much of an issue in Brisbane although it is starting to get that problem as well. Perth not sure about.
If you buy new property off the plan they can more vulnerable to economic ups and downs within the market than those already investing in the established sector. Trying to find out the correct market value for established properties is easier because transaction histories are more readily available. You may also find it difficult to visualise what a new building and apartment will look like. Builders reserve the right to make changes that may have a material impact on any aspect of he buildings attractiveness and resale value. Under the terms of contract the builder and the developer may be permitted to alter the specifications and dimensions of the building and individual apartments without allowing purchasers the right to withdraw from the contract.
Established properties perform better in terms of capital growth. You dont even have to renovate them, they're on a continual growth path. You can even accelarate the equity by simply adding value if unrenovated, simple cosmetic touch ups for example, which means you dont have to wait for the market to do it for you.
Take for example 1960's 1970's apartments, they have become increasingly popular partly as a result of the very strong capital growth particularly in inner urban areas over the last few years. Their manageable size, low maintenance, proximity to the CBD together with the fact that many are located in blue-ribbon streets of highly regarded suburbs, are among the factors which have fuelled demand. As the recent exponential capital growth has begun to return to more normal levels, specific examples are starting to show the potential to become classics of the period. Potential classics tend to emerge as a typical capital growth in a property cycle returns to more normal and sustainable levels.
As the reaslisation dawns that the CBD does not offer the same quiet enjoyment and residential amenity that most inner suburbs do, many will be attracted to less expensive apartments of the 1960's and 1970's that offer comparatively affordable body corporate fees, better capital growth and nestled amongst more expensive homes well serviced by infrastructure and residential amenities. Even better and more comfortable for intending and existing purchasers, the current prices and future value for the 1960's and 1970's apartments are firmly rooted in the forces of underlying demand rather than the an artificially set asking prices commonly associated with new developments and apartments bought off-the-plan.
If you are really pressed on time or whatever or if you are a PAYE earner and you want the minimum possible cost of owning property, then new property is possibly the best way to go. However, if you want capital growth then older property is the best way to go.
It doesnt mean that buying a new property is a bad investment, it just a different type of investment.
The choice is yours, but make sure you have done your research.
Good luck!
AJK
Buying OTP is not necessarily any more risky than buying any other property....the only difference is that you are buying it before it is built. The potential for capital gain is no better or worse than a similar established property in the same market segment - values will both move at approximately the same rate (in either direction).
If you make a good investment decision the rest will fall into place.
The only reason people get stung and hence are negative about OTP is because they have made bad investment decisions. If you buy well you can make fantastic gains in both yield and capital growth before the property is completed...and you pay relatively stuff all while you are waiting for the property to complete. You also generally get higher tax deductions which can be great for ongoing cashflow.
That said it is not for everyone.......
If you make a good investment decision the rest will fall into place.
The only reason people get stung and hence are negative about OTP is because they have made bad investment decisions. If you buy well you can make fantastic gains in both yield and capital growth before the property is completed...and you pay relatively stuff all while you are waiting for the property to complete. You also generally get higher tax deductions which can be great for ongoing cashflow.
That said it is not for everyone.......
Hi all,
Some great gems in this thread so far.
Nick, I have a cousin who owns a "beach house" in Mandurah, on a large block of land. I can't remember the exact figures she paid for it, or its current value, but it is around an increase from $160k to $360K in a couple of years. Those Valuer-general figures are a bit low for over the last couple of years for this type of property(water views, 150 metres to beach one way 300 metres the other).
I would not be expecting the same type of cap gain in the next couple of years, and the OTP unit development would almost certainly be lower again.
She uses this house as a holiday house, and lives in an apartment in Subiaco. The commute to work(in city) is a bit far(and especially during peak traffic).
bye
Some great gems in this thread so far.
Nick, I have a cousin who owns a "beach house" in Mandurah, on a large block of land. I can't remember the exact figures she paid for it, or its current value, but it is around an increase from $160k to $360K in a couple of years. Those Valuer-general figures are a bit low for over the last couple of years for this type of property(water views, 150 metres to beach one way 300 metres the other).
I would not be expecting the same type of cap gain in the next couple of years, and the OTP unit development would almost certainly be lower again.
She uses this house as a holiday house, and lives in an apartment in Subiaco. The commute to work(in city) is a bit far(and especially during peak traffic).
bye
Richo said:
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Dear Forumites,
1. I like to hear your views on my off-the-plan purchase for a 2-bedroom medium rise unit apartment at Swell Residence II Project by the Toga Development, at Burleigh Head, GoldCoast area QLD 4220 for A$450,000 in July 2003, facing the Ocean and swimming pool with a NE aspect, directly opposite the Burleigh Beach and across the Goldcoast Highway. The GoldoCoast market is said to have less than 1 months of supply available when I purchased the unit.
2. According to Residex, the unit was projected to have a market value of A$570,000 in 5 years'time wef 2003.
3. Not withstanding this, I was actually informed by the Project's marketing agent that my unit price has increased by A$50,000 last October 2003, following the physical commencement of the Project Construction Phase, as planned.
4. I then arranged for an independent valuation sometime in December 2003, to confirm the prevailing market value for the unit. However, there was no reported price increase or any known unit resale being carried out for this Project.
5. I was again told this week that my unit price has increased by some A$80,000 -A$100,000.
6. If you are familiar with this Project, please advise me accordingly. How do I actually go about properly ascertaining and documentating the unit value at different stages of the off-the-plan investment cycle?
7. Thank you.
regards,
Kenneth KOH
