Buying OTP
- Thread starter JDM
- Start date
Joel, do a goole search on this web-site.
site:somersoft.com "OTP"
Then read the multitude of 'issues' people had with their OTP purchases. Too, too many to reiterate here.
They all don't go bad though. Do your readin' and make your own decision.
Personally I like OTP. BUT there is ALOT of potiential to go wrong with it. OTP is often (but not always) over priced. And generally the buyers attitude is to try and 'guess' what it will be worth when it settles, and then will make stupid mistakes because of this. I believe that you should only ever buy OTP if the property would be worth what you are going to pay, if it extisted at the point in time as you are actually signing contracts. Any capital gains from there on in is a bonus. You also need to be extremely sure of your finance, and have back up plans B, C, D and E up your sleeve just in case.
OTP is alot riskier simply because there are more unknowns in regards to the economic climate.
We are building and IP at the moment. When we signed contracts (12months ago) we were more then servicable at most institutions on DH's income alone. The IP was due to be completed in Feb 2010. Well fast forward to today, The frame is up - but that is it, hopefully it will be finished by christmas. We now only have one institution who were are servicible for a 97% loan, and in fact only a handful who will consider us servicable for a 90%, with our entire family income - A HUGE difference, all due to the interest rate rises and tightened LMI criteria. This is all with the IP (which hasn't even been built yet remember) increasing in value about 40k and expected rents going up from about $430p/w to $470-500 p/w.
If we get knocked back on finance for the 97%, We will then have to get serious about options B, C, D and E. If all of thes options fall through, worst case senario, then the risk is that we loose our 10%deposit and have to fund any shortfall that may occur in a resale. So you can see why people would see this as risky.
There are no finance clauses or other trickt little clauses that let you get out of an OTP contract - once you have committed, that is it, no 'ifs', 'whats' or 'buts'.
OTP is alot riskier simply because there are more unknowns in regards to the economic climate.
We are building and IP at the moment. When we signed contracts (12months ago) we were more then servicable at most institutions on DH's income alone. The IP was due to be completed in Feb 2010. Well fast forward to today, The frame is up - but that is it, hopefully it will be finished by christmas. We now only have one institution who were are servicible for a 97% loan, and in fact only a handful who will consider us servicable for a 90%, with our entire family income - A HUGE difference, all due to the interest rate rises and tightened LMI criteria. This is all with the IP (which hasn't even been built yet remember) increasing in value about 40k and expected rents going up from about $430p/w to $470-500 p/w.
If we get knocked back on finance for the 97%, We will then have to get serious about options B, C, D and E. If all of thes options fall through, worst case senario, then the risk is that we loose our 10%deposit and have to fund any shortfall that may occur in a resale. So you can see why people would see this as risky.
There are no finance clauses or other trickt little clauses that let you get out of an OTP contract - once you have committed, that is it, no 'ifs', 'whats' or 'buts'.
Joel
Here is a few
1. Bank does not give the value at the same price as you bought it and hence you need to find more cash from somewhere/someone
2. When completed you are competing with heaps of other people for renters
3. Why buy OTP when there is generally as good a property in the area
4. You can't add immediate value
5. Prices are increased on future values not on todays value
6. Depreciation schedules are based on maximum tax rate generally
7. Finishing times are a stab in the dark
8-36 to come later if you want some more reasons
Jezza
Here is a few
1. Bank does not give the value at the same price as you bought it and hence you need to find more cash from somewhere/someone
2. When completed you are competing with heaps of other people for renters
3. Why buy OTP when there is generally as good a property in the area
4. You can't add immediate value
5. Prices are increased on future values not on todays value
6. Depreciation schedules are based on maximum tax rate generally
7. Finishing times are a stab in the dark
8-36 to come later if you want some more reasons
Jezza
