Build for an IP

From: Jude H


Hi all,

Need some different thoughts on this to see if I'm on track or way off.

My figures show that I can build (complete ready to move in) an IP for about 20K less than I buy established in the same area in a new subdivision. House is comparable in beds/ ensuite etc.

Yes the stamp duty will be cheaper but it's negligible, a few K only.

Seems too easy. I feel like I've missed something (big!) but for the life of me can't see what.

Any help would be greatly appreciated.

Cheers

Jude
 
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Reply: 1
From: Manny B


Hi Judie,

Building a new IP can have its benefits as you stated being cheaper, but some of the $20k saving may be used up to establish the gardens (front & rear) & install blinds throughout...

If you are lucky and get in early, you can gain good benefits (if the market continues positively). A friend of mine purchased a new IP in a new estate at Melbourne's Caroline Springs over a year ago, only purchased it for $115,000. By the time it was completed (5 months ago), the guy that sold it to him offered him $160,000 for it. If you have that kind of luck with a quick equity groth, you are in luck. By the way, my friend didn't sell & is getting $225 per week rent from this property...

Note: new IPs do offer great tax benefits, but overall in the longer term if you purchase in a new estate (that has already inflated prices), the capital growth may not be as high as if you purchased in an area closer to the CBD. Reason for this is that in new areas where there is plentiful land, new house & land packages tend to be cheap, therefore why should someone pay a higher price for an older home?

Good luck with your decision, but do your home work prior to making your final decision...
 
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Reply: 2
From: Rolf Latham


Probably Not missed anything - obviously the builder, marketing people etc need the margins. From other posts I would think 20 k would be about the saving to expect if you did it yourself.

Ta

ROlf
 
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Reply: 1.1
From: Jude H


Manny B,

Have already taken all 'extras' into account. This saving is after everything is done. As the ads say " Move in with nothing to do". The way I figure it is this. Just bought a house 8 months old for 140K..25K below market. Have done the sums many, many times and can get a 2sq smaller house, same suburb, house and land with everything done for 140K. Just sounds too good to be true. If it's right, then why wouldn't I just do this instead of going through all the bs of agents etc?


Rolf,

Not sure I understand you. This is not owner build. Will get company to build. Do I still get the 20K?

Thanks guys

Jude
 
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Reply: 3
From: Michael Yardney


Jude,
Sometimes you can build a new house in the outer suburbs a little cheaper than what an established home would cost. That's how spec builders make their money. I have found that if you are not the builder, there is usually not a big margin in it for the investors. MORE IMPORTANTLY you have to ask yourself, "will this type of property make a good long term investment... will it be in constant high demand by both tenants and landlord". If you accept that as our lifestyles are changing, the needs of many tenants (and for that matter owners) are likely to be different from the accommodation needs of the past, then the standard 3 bedroom home on a quarter acre block may no longer be your best option for an IP. There is now an increased demand for a secure well designed and well located medium density housing 10-12 kms from major centres like Melbourne and Sydney. Statistics show that this is where maximum capital growth is occurring, and minimal growth is occurring in outer suburbs. The problem of course is how do small property investors get involved in this sort of development where the real money is, and where capital gain is likely to outpace a new home in the outer suburbs or country town. Up till now, this has been the domain of professions, or those in the industry. Recently we have been putting syndicates of investors like yourself together allowing them to become "armchair developers" and to purchase their units in just these sort of developments "wholesale". Because so many people in this forum have approached me about this, (at least 30 emails in the last week alone), I am holding an event later this month to explain just how this occurs and to show how I have made money in the property market. No charge, no strings attached, nothing to sell. If you are a Melbourne property investor and want more information, please email me - [email protected]
 
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Reply: 3.1
From: Jude H


Michael,

Hi again. We have already spoken, I'll see you on the 20th.

Jude :)
 
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Reply: 4
From: Apprentice Millionaire


Hello all!

Jude raises a good point!

In looking for new IP, there are a few ways of going about it (and this is the newbie showing off his ignorance :) So please be patient).

One is to buy from a developer off the plan, aim to get there before he/she has invested money in marketing, and thus possibly make a saving by doing so.

The other one, which Jude is considering or has done, is to find land, buy cheap, and then build. If you can build cheaply (but with quality), then you win twice.

Wouldn't the chances of making a profit at buying time be higher with the second option?

Cheers
Apprentice Millionaire
(aka Jacques in the old forum)
 
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Reply: 4.1
From: Michael Yardney


Hi apprentice millionaire Don't be ashamed that you're a newbie. Often a new refreshing slant on things is good too shake up us old codgers. The only fault that I can find in your argument is the fact the sort of property you will end up with may not be the ideal Investment Property - not one that will deliver good capital growth - please refer to my response to Jude H above
Michael Yardney - Metropole Properties
 
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Reply: 4.1.1
From: Kristine .


Hi

Syndicates of investors, Jude, can take many different forms.

A fiend (not a client) of mine has just been bruised by joining a syndicate a year or so ago, where the developer and the investors entered a 'share project' agreement.

The idea being, that the developer would put the building out to tender (guess who won the tender?), cost themselves in as 'project managers, the investors would all borrow and fund the project, and at the end, well, there would be x% of profit to be shared.

Sloppy management practices, with no particular regard for the interest bill - that's being paid for by the 'share investors', remember, has meant time and budget overruns, and the x% has whittled away to very little x%.

Buying off the plan, however, can be a very good risk, with no chance of losing even $1, as the Subdivision Act 1988 (In Victoria, at least) requires that your deposit is kept in a trust account until the subdivision is registered and there are rescission clauses designed to protect the purchaser.

But investing is all about a risk for return ratio, unwritten but applicable in all cases. I guess it's all about your own personal comfort zone.

PS I built to rent, and it was a great experience (Pioneer Homes in Victoria, now Devine Pioneer)) from start to finish. On time, in budget, good job. Happy tenants, leased before the paint was dry. Ask any property manager, there is a shortage of quality rental property in pleasant neighbourhoods. eg Caroline Springs post.

Any time you want a snappy legislative quote, just call.

Cheers

Kristine
 
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Reply: 4.1.1.1
From: Michael Yardney


Kristine
You are right. You have to be careful who you get into bed with... you have to do your due diligence carefully before joining a syndicate, but that's the same with any form of investment. You also have to weigh up the risk/reward ratio (again the same as with any investment). The more potential reward usually the greater risk.
Further, you are right, there are many types of syndicates and we have learnt from the mistakes of others. I know you weren't knocking us in particular but, to clarify the matter, what we do is definitely not what you describe. We do not take a financial interest in the project, nor share the profits, don't do the building or get kick backs. Just take a fixed fee for making our clients' money. And the clients have an interest in one unit in a development together with others who have an interest in their own individual units... no shared risks. We find sites for the specific clients' needs, do accurate feasibility studies, get independent builders to give fixed time and price contracts, and handle all the day-to-day worries for our clients, who either keep their investments that they have purchased wholesale or flip them for profit.
If you want further information, please email me.
Michael Yardney, Metropole Properties
 
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Reply: 1.1.1
From: Rolf Latham


Hi Judy

Yes you can hold onto your 20 k. By doing yourself I did not mean schlepping bricks or tiles, nor did I mean enganing your own subbies. I meant you engaging your builder of choice and thereby taking out the marketing marigns.

Hope thats clearer than mud

Regards

rolf
 
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Reply: 4.1.1.1.1
From: Kristine .


Michael

I wasn't knocking anyone or anything, and particularly not you or your company.

All that glistens is not gold, and sometimes people forget that.

From reading your posts, I am sure that you and any company with which you are involved would be of the highest integral calibre.

If you care to send me some info regarding your seminar, please do

Kristine

[email protected]
 
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Build for an IP/Michael

Reply: 4.1.1.1.2
From: Michelle Riley


Hi Michael,
You say a fixed fee for making your clients happy?Thought we can't buy happiness?Just kidding?
How much is the fee?How do you work it out?
You say the clients buy wholesale.How could a client know the wholesale price?Assuming these people don't have knowledge with building costs.
You are holding an event to explain how it works.
Robert K says any deal should be able to be explained simply.
This event is free and it's not to sell anything.Why are you doing it then?
It appears it would be to find perspective clients.I don't have a problem with that but if you charge a fee when they come on board,aren't you then selling something?
Sorry Michael but I think all newbies should ask questions when in doubt or even when there not.

Cheers Michelle
 
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Build for an IP/Michael

Reply: 4.1.1.1.2.1
From: Michael Yardney


Hi Michelle
Thanks for the comments. I agree that all newbies should ask questions , but so should the old codgers. Don't believe everything people tell you, especially on the internet and especially from estate agents (which I'm not.) To answer you questions in turn
1. Money can't buy happiness - You're right, but it's sure nice rolling up to your problems in a Porsche...Just Kidding!!! I've learned from the experience of a bitter divorce how important balance in your life is and how family,friends and health are more important than a portfolio of IP's. Balance is the operative word.
2. Your comments about clients buying wholesale..I expect my clients to do some homework - due diligence - and understand what they are getting involved in. But they have the comfort of their names on the title and knowing they have bought and built about as well as they can. By avoiding stamp duty, GST, developer's margin, agent's fees, marketing costs etc because they are the (armchair)developer; they are definitely NOT paying retail prices.
3.Free.... etc. There will be no courses to sell, no properties to sell, nothing to sell on the night. So why am I doing it she asks? Because every time I hold a seminar, I find a few like minded people who come up and approach me afterwards and join one of my syndicates as co - developers so that they can buy their properties wholesale. I've found that giving valuable information freely with no strings attached has a magnificent payback. You see...I show participants how I turned $2,500 into a $5million property portfolio in my spare time and then how I grew that further by quantum leaps by becoming a property developer. I show how I make money on a daily basis in the property market something others are not doing because they are teachers -I'm not - I make my money in the property market.
Sorry for the long answer, but never stop asking questions.
Michael Yardney Metropole Properties
 
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Build for an IP/Michael

Reply: 4.1.1.1.2.1.1
From: Michelle Riley


Thanks Michael,
Now I know more.
Sounds like your on top of
your game.
I'm assuming the $2,500 into 5 mill,
didn't happen over night.
Unless you struck oil on one of those sites.
Loss is an unfortunate part of life.
Chronic illness has tested my acceptance
the the utmost limits and beyond.
As we all say never know what's around the bend.
Cheers Michelle
 
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Build for an IP/Michael

Reply: 4.1.1.1.2.1.1.1
From: Michael Yardney


Michelle
It definitely did not occur overnight. It took 15 years, but as I say it was in my spare time. I also held down a job and put 4 kids thru private school. Once I built my asset base I turned my hand to developing properties. That's when the profits sky rocketed!
I'm sorry to hear about you illness - I understand the importance of good health...look after yourself.
Michael Yardney Metropole Properties
 
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Build for an IP/Michael

Reply: 4.1.1.1.2.1.1.1.1
From: James Doherty


Michelle, my wife too has a chronic illness she has had CFS for five years. The last 2 years I have been slaving away at home and work and in our spare time between kids we have been researching IP's hopefully financially we will be able to purchase our first soon. We have our goals set it's been hard but like Micheal say's my wife wont feel the pain so much sitting behind the wheel of her porsche....
Thanks to for all the information micheal.
regards
JAMES D
 
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Build for an IP/Michael

Reply: 4.1.1.1.2.1.1.1.1.1
From: Michelle Riley


Hi James,it's not a lot of fun
is it?There's a good aussie support
group at [email protected] and a
better one in the US if your wife is interested.
Sometimes I feel like Ginger Rogers
I have to do it all backwards and in high
heels.
Cars don't motivate me(hard trick with CFS),
think they're more a guy thing.
I'm keen to visit a doctor in the US,
he charges about $4,000 US.If he fixed me up
you wouldn't see me for dust.Feel like I've got a lot of living to catch up on.
All the best James,sounds like your wife
is a lucky girl having your help.Guess you've both realised
how hard this disease can be for couples.Certainly tests the sickness and in health bit.
Cheers Michelle
 
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Build for an IP/James & Michelle

Reply: 4.1.1.1.2.1.1.1.1.1.1
From: Jamieson .


James & Michelle

I notice your comments on CFS. I know a number of people who have had great improvements in their condition from Tahitian Noni juice. Have you tried that? Or even heard of it?

Noni is fairly new to Australia. It is an all natural fruit juice that seems to help people with all kinds of health problems - helped my back pain and hay fever enormously.

If you would like to know more please email me direct. Yes, I am a distributor of the product - provides good cash flow for IPs!

Regards

Jamieson
 
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Reply: 3.2
From: Eddie Mior


Hi Im new to this site and I would like some info on this property investor forum

regards

ed
 
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