Chicken ?

[tubs]

OTP

Cons

Taking gamble on realestate and interest rate market at time of settlement

Can't be 100% certain of the product you are buying until you see it built

Competition for tenants at time of settlement


Worse cash scenario is that the product is disappointing, values drop and cost of finance increases by setlement. You have to put in extra funds to make financing possible.

You should look at each risk and assess it on merit.

Con 1. RE prices and interest rate will hit you even if you buy estabished, unless you do this and lock the rate in. If it affects your serviceability, confirm that you can still service it if rates go up.
Also, you may need a buffer if vals on completion dont go right, but dont you get the loan approved when construction starts?

Con 2. You can look at the developer's previously built homes, display homes etc. Should give you some comfort.

Con 3. If you buy established, and a tenant leaves in 12 months time, you'll be in the same boat from a competition for a tenant perspective anyway.

Worst case scenario is a combination of all 3. If you believe in the area, and can cover the risks, then they dont appear as scary.

 

[The Y-man]

Surely these are pros for NEW property, not OTP. I would say the above applies to any properties that are new (or just new-ish).
Alex

In Victoria, stamp duty concessions for OTP vs brand new

Cheers,

The Y-man

 

[GoAnna!]

You should look at each risk and assess it on merit.

Con 1. RE prices and interest rate will hit you even if you buy estabished, unless you do this and lock the rate in. If it affects your serviceability, confirm that you can still service it if rates go up.
Also, you may need a buffer if vals on completion dont go right, but dont you get the loan approved when construction starts?

Con 2. You can look at the developer's previously built homes, display homes etc. Should give you some comfort.

Con 3. If you buy established, and a tenant leaves in 12 months time, you'll be in the same boat from a competition for a tenant perspective anyway. Worst case scenario is a combination of all 3. If you believe in the area, and can cover the risks, then they dont appear as scary.

#1 Sometimes deveopements go over 18 months. Just look back at prices and interest rates 18months ago and you can see that 18 months is a LONG tome in real estate. With established you are financing and valuing at the same time as purchase so certainly less risk due to unknown.

#2 Agreed.

#3 Not really. Not if you are buying OTP in a largish development when you will be completing with the exact same product at the same time. Just something to plan for.

 

[Harris]

Hello everyone,

I was rather close to buying my first IP near Frankston (south of Melbourne) - close to the new Eastlink - and I still think the location is quite nice. But with the current subprime / global credit crunch, I'm really considering to chicken out of the whole deal.



Void

I am as bullish as they come about Frankston's future potential however even I wouldnt touch OTP with a barge pole ...

There are too many properties available in Frankston, a lot of motivated vendors, heaps of opprotunities for long settlement...

If the aim to buy OTP is to buy a property at today's price whilst not settling for the next 12 months (and get the growth as a bonus), try giving offers with long settlement.

If you put in multiple offers with a short list of prop that fit your criteria, you will be surprised at how easy it might be to get long settlement.

Talk to multiple agents, tell them what you are after... query them on long settlement and buy something that you know already exist and will allow you to further add value to it down the track... that way you can compound your gains.

OTP can be a fairly risky proposition. Try to avoid it if you can.

Good luck

Harris

 

[Sunfish]

Fear has copped a lot of bad press here, but fear is the only thing that keeps you alive.

I think you have every right to be fearful. Just try to put the irrational ones to one side and answer the rest after careful thought.

Fear should not stop you but nor should it be over-ridden on some macho urge.

 

[Aaron Sice]

i think this is an easy problem to solve, mentally anyway.

will you regret buying it if the market goes bad MORE THAN you regret NOT buying it if the market goes up....?

which one will you kick yourself over?

i say buy - you've done the fundamentals and they line up, now you're waiting to enter the market. you should probably wait for a buyer's market - but wait.... isn;t it a buyer's market at the moment?

don't forget all those lovely tax offsets.

 

[sparky23]

What type of property is this?

Is it an apartment, unit, high rise, house and land? Many people tar OTP with the same brush but you should take each at its own merits, many people have been very successful with these types of purchases.

I don't know that you can go too far wrong with Carrum Downs as a suburb, I have lived in Seaford and Chelsea aswell as down on the Mornington Peninsula and would consider most of those coastal suburbs. When you look at the asking price now is it the same or similar to equivalent properties that are on the market at the moment? I for one would be interested in knowing more about these properties, if you have a link feel free to send it to my pm or email address.

 

[Void]

Sparky23,

thanks for your input. It's a house and land package - and I'll pm you the link.

Cheers,

Void

 

[GordonGekko]

i think its the 1 BR+ houses down the road ... they look fancy in print .. but will it be great when its build ... and only 1 BR? ... i almost bought one (first ip too!) but OTP mmm dont know ... and the bearish marked ahead of us dosnt go well with the negative gearing.... just my 2c

 

[sparky23]

Hi Gordon

No these are 3 bedders so not the same properties just waiting to look at some more info.