Christies Beach, SA

[Blitzkrieg]

Christies Beach, SA - Guru advice requested

Hokay,

I am probably a few months (or more unless a super broker has any better ideas) away from being able to move on a purchase, so here is an example of what I have been working through in my head.

I don't mind putting my example up as I figure I can't buy it yet anyway...

(And I don't have any interest in the sale of the property, I just want someone else to double check to tell me what I am potentially missing here.)

Potential purchase would be a house and land package off a builder for the purpose of picking up a property at "wholesale" or to get instant equity, so I can then move on another fairly quickly - aggressive acquisition ..... like this

Self fund an extra $20,000ish in landscaping, aircon, robes etc. (From raping the WA dirt of smelly black stuff wages)

End with a $303,500 loan (95% of H+L package cost)

And an asset worth minimum $339,000 to $349,000 (smaller house in worse area than my example) to maybe $360,000 to $375,000 (similar sized house slightly closer to beach).

Estimated potential rent:

$360/wk (only comparable I could find...)


Right, so what I get left with is a property that cost me 339,000 (319,000+20,000 finishings) rented out at conservative $350 (5.37% gross return) and a final LVR of 84% (based on $360,000) - $21,000 instant equity.
Questions are;

1. Is there any reason why this is a bad idea straight off the bat?
2. Is $20,000 enough for finishings - or an overestimate perhaps?
3. Can I borrow the extra $20,000 as well with the bank considering the final valuation?
4. Is there a better way to get wholesale (buying land and commissioning a builder myself?)
5. Any other thoughts or observations appreciated.

Thanks gurus!

Michael.

 

[Rooster]

Potential purchase would be a house and land package off a builder for the purpose of picking up a property at "wholesale" or to get instant equity, so I can then move on another fairly quickly - aggressive acquisition ..... like this

Hi Michael,

Buying a house and land package is not buying a house at a wholesale price.

I have built twice now and house and land packages being offered at the same time as my build were going at a $40k premium to what it cost me to build.

By far and away it would be better to source your own land and build if possible.

Your $20k for extras would cover you pretty substantially.

Generally the extras you need to fork out for are curtains, aircon, security screens, fencing and turf/landscaping.

Good luck with it

Cheers

Rooster

 

[Blitzkrieg]

Thanks for the input!

Actually, as I was thumbing through getting my links - I did happen to notice a block of land with a familiar address. I went back to one of the other packages and did the quick maths on their mark up...

So does that mean the builder hasn't even got the land? They are selling a package and will buy the land if they get the sale?

Also, I assume if I just buy the land, my stamp duty would be considerably less, what do I pay stamp duty based on with the H+L? The land component, or the whole package?

Thanks!

Michael

 

[Rooster]

Thanks for the input!

Actually, as I was thumbing through getting my links - I did happen to notice a block of land with a familiar address. I went back to one of the other packages and did the quick maths on their mark up...

So does that mean the builder hasn't even got the land? They are selling a package and will buy the land if they get the sale?

Also, I assume if I just buy the land, my stamp duty would be considerably less, what do I pay stamp duty based on with the H+L? The land component, or the whole package?

Thanks!

Michael

Builders secure their land on builders terms and then offer that land as house and land packages.

You may still build equity out of a house and land package but i would always choose to build on land that i sourced first.

You will only pay stamp duty on the purchase price of the land.

Cheers

Rooster

 

[.toe]

Blitzkrieg what made you choose Christies Beach?

Margaret Lomas loves this area for investing, she says it's in a rare situation where the drivers are there for both capital gains and rental increases. Due to infrastructure making it closer to the city I believe?

 

[Blitzkrieg]

My thoughts are;

It's one suburb away from a Bunnings and a major shopping complex. Christies "Beach". Due to it's location and the socio economic background of it's population it has remained at affordable levels (for me anyway). Most of the housing trust is in Christie Downs or nearby Noarlunga and Hackham West... Yet due to the proximity it has kept the "Christies" name tainted somewhat in the local ears. When compared to other beachside suburbs in Adelaide, it has not enjoyed the same price rise (yet?). It is close to where I live - so it is a good trial of the build concept. There is a lot of housing trust moving out and subdivions moving in (urban renewal) which is improving the socio economic situation which should in time improve the value against the Adelaide median. A lot of Adelaide development is moving further and further south making Christies Beach a "closer" suburb to the CBD, at least subconsciously.

It should be a winner - in time. But if it doesn't perform exceptionally in the short term, it will still perform admirably in the long term.

Nice to hear Margaret Lomas has singled it out! I probably had all the same ideas as her before I heard that, so really it just made my resolve stronger. Awesome!

Michael.

 

[Gools]

Michael, before you get too far down the H&L road, you need to work out what you are getting for your money with the package and what you would want in the finished product.

- Carport/garage. It's dotted in their plan so it would be an optional extra.
- Is the footings allowance going to be close to the mark? Most builders allow $10k which in this day and age isn't even close to the mark for a decent sized home.
- Will it need to be fenced, security, will floor coverings be up to scratch, window furnishings, storm water allowance enough.... Lots of questions to find the answers for.

Just take care in trying to come to a finished product cost so you can check your comparable sales correctly. No point paying more than an existing comparable property which would be a quick deal rather than the time frames in finishing the house off once handed over and having your deposit out of action for the 12 months + it could take to build.

Find out what you are getting exactly for the $319k first.

Gools

 

[Blitzkrieg]

Michael, before you get too far down the H&L road, you need to work out what you are getting for your money with the package and what you would want in the finished product.

- Carport/garage. It's dotted in their plan so it would be an optional extra.
- Is the footings allowance going to be close to the mark? Most builders allow $10k which in this day and age isn't even close to the mark for a decent sized home.
- Will it need to be fenced, security, will floor coverings be up to scratch, window furnishings, storm water allowance enough.... Lots of questions to find the answers for.

Just take care in trying to come to a finished product cost so you can check your comparable sales correctly. No point paying more than an existing comparable property which would be a quick deal rather than the time frames in finishing the house off once handed over and having your deposit out of action for the 12 months + it could take to build.

Find out what you are getting exactly for the $319k first.

Gools

Cheers,

Yeah certainly, these are all question I fully intend to get the answers to before signing any piece of paper. And if it ends up that time frames are indeed that long or longer and holding costs therefore evaporate any sense of equity creation, then buying an established example and whacking a tenant in there straight away will be the end solution.

Thanks for the input.

I am home next Wednesday from my desert "paradise" and intend to ask these very questions - and any others worthy - during my week of R+R.

First stop, my accountant for advice on purchase structure. To trust or not to trust - I have a hybrid discretionary trust already active with GST activated as I am subcontracting where I work...

Question for the forum - does this mean (for arguments sake) if I have a $99,000 build price and purchase through my trust, that I can claim the $9,000 GST back?

(and if I keep the house for 5 years, I don't have to pay GST on the sale?)


Or I can wait to speak to my accountant


Michael

 

[Comper100]

My thoughts are;

It's one suburb away from a Bunnings and a major shopping complex. Christies "Beach". Due to it's location and the socio economic background of it's population it has remained at affordable levels (for me anyway). Most of the housing trust is in Christie Downs or nearby Noarlunga and Hackham West... Yet due to the proximity it has kept the "Christies" name tainted somewhat in the local ears. When compared to other beachside suburbs in Adelaide, it has not enjoyed the same price rise (yet?). It is close to where I live - so it is a good trial of the build concept. There is a lot of housing trust moving out and subdivions moving in (urban renewal) which is improving the socio economic situation which should in time improve the value against the Adelaide median. A lot of Adelaide development is moving further and further south making Christies Beach a "closer" suburb to the CBD, at least subconsciously.

It should be a winner - in time. But if it doesn't perform exceptionally in the short term, it will still perform admirably in the long term.

Nice to hear Margaret Lomas has singled it out! I probably had all the same ideas as her before I heard that, so really it just made my resolve stronger. Awesome!

Michael.

Thats why we invested there too, API did a thing on it a few months back (we were in it )
I think the area has a lot to offer and yeah i didn't know about Margret's thoughts but thats great.

I would say there is better money to be made than H&L in Christies however.