Building an IP

I have started the search for my next ip, I have just been spending time visiting open houses of all sizes and locations to try and educate myself on what is around and what is good value ect. I have a pretty clear idea on what I want and have come across an "investment package" which seems to be a package that is put together by a real estate agent, Builders and NAB. This "package" appears to have all inclusions and it states that on completion that it is ready to be rented out with nothing else needed. I realise there is probably a massive markup on the actual cost...

So this got me thinking about building in the area that I wish to buy -yes there is land available. I have no experience with this at all so would love any opinions, old threads or general feedback on any of the above. I have tried searching but i can't make it bring up any info on what I want.

We are looking at buying 2 investment properties in the next 6 months or so, so another idea we had was to build one and buy an already established house as a learning experience. Maybe thats a bit premature and we should just concentrate on one thing to start off with, as in just buying already built houses?

Another deal I have come across was buying a display home then renting it back to the builder for a few years. can't think of what this is called. - Is this something to steer clear of?

Would love to hear of any pros and cons. I guess I am concerned of hidden costs, no experience on building or know anyone else that has so no one to throw back ideas to if something got messy. :confused:
 
leasing back a display from a builder can be good, depends on the builder, the price, the rental and the likely CG. Many builders will negotiate the price of their displays. they are in the business of building, not holding property.
Lenders see leasebacks as commercial finance, so you usually can only borrow a maximum of 80% of their valuation, and there may be other restrictions depending ont he lender.

Building an investment property isnt that dificult. A volume builders sales person will lead you through the process. Many have fixed price packages available and will go through what is and isnt included, and what you are likely to encounter in the process and how long it will take.
What you have to research is vacancy rates, likely rental and depreciation. Usually new estates have significantly less CG than established areas. So you need to judge the balance you require for cashflow or capital growth.
 
Our first IP was a build, (regional Victorian city).

I knew the area well, had attended Uni there, knew 2 new schools were to be built. Good infrastructure, good steady average "longterm" growth ...(over 9%).

Researched around blocks of land, was fortunate to purchase a couple of the blocks just before the blocks doubled, (actually almost tripled in value).

So, built a 3 b/r 2 bath DLUG on the bigger block, had the building contract down with everything-turn key job, ready to move in and rent, bar the landscaping which we did.

The smaller block built a 2 b/r townhousey/unit. Same thing, contract was everything inclusive-bar lanscaping.

Nice couple of IP's.

Used a builder we selected after asking around and looking at builder's work (houses). But am happily using Hotondo Homes some years later too.

Good luck with what you decide.

We caught the cusp of land going up..the rental return on our first build was 7.6% Loan of $150,000 and rented for $220 p/w to begin with from memory. I do remember looking around and thought with the good value of the land blocks we could build (if we struck quick enough) a couple of new homes for what established houses were selling for. For some reason that seemed a good idea at the time.

From there we went and bought a swag of established IP's with the equity of the new built IP's. (The land going up considerably and relatively quickly).

That's not to say it will be that for you.

And I'm actually doing it all over again in another regional city right now, some years later...funny enough. I have looped.:)

Got some incredibly good value blocks and building, I think will end up at about a 9.9%+ return. Block values going up already and we are not even finished building. Same thing again, our loan will be $157,000, rent for $300 p/w +...in my mind, I am able to build a new home for the equivalent costs of established older houses..

I am rather pleased. :) It suits us at this time.
 
Thank you Tobe, I will keep all of that in mind when deciding whether or not to build.

Our Obsession - Thank you for sharing your story. I find a lot of inspiration from hearing other people's stories!

I have checked out some building forums, which seem to be filled with people building with the fhb. A lot of people seem to be really disappointed with the outcome. I am finding it hard to find any good reviews. Do you think this is because of choosing the wrong builder or the emotional side of it as it is being built for a ppor or any other reasons?
I realise this would only be a small portion of people actually building, I was just doing a bit of googling late last night to see what I could come up with. This was also a concern of using one of the volume builders that maybe they were more about quantity rather than quality. I do like the idea of them walking me through it though. It would be a good starting point.
 
Cath:
I have checked out some building forums, which seem to be filled with people building with the fhb. A lot of people seem to be really disappointed with the outcome. I am finding it hard to find any good reviews. Do you think this is because of choosing the wrong builder or the emotional side of it as it is being built for a ppor or any other reasons?

I'm not sure what their troubles have been, or the why's.

I distinctly asked when building IP no1 to have it all inclusive, eg allowance for window furnishings, clothesline, heating/cooling-everything possible so it was ready to be rented out, and that would all be part of the construction loan, my reasoning for that was let it all be in the loan so as not to forking out $$ after the construction to get upto renting out scratch.

The landscaping which was very basic, stone/barkchips drought tolerant plants...was done in one weekend.

Colors when they asked, for interior was "neutral"..

So I am thinking (like you touched upon Cath), we had no emotional involvement, (as in being our dream home or anything), apart from having a lot of fun building it.

I did read through all the paperwork/contracts, just wanted to get an idea and sense of everything, what I didn't understand I asked, sometimes I asked the same question several times..:eek: Oh well. That an having the builder understand we wanted everything ready to up and rent. He had been around the block a few times, he knew and so did Hotondo (building now)...it's all going well.

I have heard some folk have issues with building but that has not been our experience, it's been fun. Creative fun.

I'm not one to go to a builder and say I want this this or this....I say I want an investment property 3 b/r 2 bath DLUG with everything all inclusive in price, ready to rent, both the builders so far have gone, okay-gotchya.

The other thing I did was get quotes on houses, prior to utilising each builder, to get myself familiar with costs and go to open for inspection on display homes, had a peek at builder's constructions, talked to family/friends of those that built and knew of folk that built.

So, I do reasonable research. With the first builds I felt we got really good quality builds, I did feel the display homes were pretty boxy, flimsy...and the prices were not that great b/w our private builder and companies, it was a no brainer.

Then our current build(s) the guy has 30 years experience, people I respect opinion(s) of speak highly of him/his business, we had a look at houses he has built, (along with some of our family that were builders), quite pleased with his work.

It may sound more complex than it was, I am researching stuff when I don't even realise it. Meaning I was looking/listening for builders when we were acquiring established IP's...I must have had in the back of my mind we would build again...:)

Squirrel storing up it's nuts.:p

And the figures stacked up, I sometimes get rambling and forget to say OUR FIGURES/DEALS stack up right for us. Thanks to our mortgage broker, ourselves and team obsession. My job is made very much fun and simple.
 
The places we have built, (and are building), have been rented virtually immediately, people are seeking well presented IP's, and there is an ongoing shortage of newly built IP's in relatively well located parts of the city, (eg park, schools, cbd), as well as being covenant protected areas too.

We get premium rental price for our IP's. Actually in all our regional cities, newly constructed and established IP's we have never had any difficulties renting them out. Just FYI.
 
I distinctly asked when building IP no1 to have it all inclusive, eg allowance for window furnishings, clothesline, heating/cooling-everything possible so it was ready to be rented out, and that would all be part of the construction loan, my reasoning for that was let it all be in the loan so as not to forking out $$ after the construction to get upto renting out scratch.

This is exactly the type of deal I came across (that got me thinking) all inclusive ready to rent out. I really really like this idea - keeping it simple to start with.

Colors when they asked, for interior was "neutral"
This would be me as well I HATE choosing colours and things. - also keeping it simple.

I'm not one to go to a builder and say I want this this or this....I say I want an investment property 3 b/r 2 bath DLUG with everything all inclusive in price, ready to rent, both the builders so far have gone, okay-gotchya.

The other thing I did was get quotes on houses, prior to utilising each builder, to get myself familiar with costs and go to open for inspection on display homes, had a peek at builder's constructions, talked to family/friends of those that built and knew of folk that built.

This was my next step to get out and check out all the display homes talk to the builders to get a feel for what is what. I pretty much know what I want and where I want it so hopefully I can do exactly this for the price I want.

It may sound more complex than it was

It doesn't at all. You have actually made it seem possible, I always thought building would just be too difficult so kind of wrote it off until recently. My understanding so far is that by building you get what you want, where you want it, and as long as you do your home work on the details its not such a bad idea provided the numbers stack up?

We get premium rental price for our IP's. Actually in all our regional cities, newly constructed and established IP's we have never had any difficulties renting them out. Just FYI.[/

FWIW I am looking for my investment property in a regional city.

Squirrel storing up it's nuts.:p
haha love this! So true. Thanks again for sharing your story some more :)
 
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