Country Houses in NSW

[sash]

Hi There,

Has anyone heard of Country House & Land based in NSW? They apparently, thye buy houses in the Country (i.e Parkes, Peak Hill, Temora, Dubbo, etc.), renovate and resell to investors (I found them though an ad in the Sydney Telegraph). They guarantee that the property will be tenanted up to 25 years (5x5x5x5x5 lease option). They do this by moving pensioners who have not been able to buy a house in Sydney and are looking for a cheaper life style. They also guarantee in their contract that that they will do the maintenance for the duration of the contract at their expense.

I asked how they get rewarded, and they confirmed the following:

1. They guarantee an 8-10% rent return to the investor and they
make a margin on top.

2. They make $5-10K per house they sell. Most of the houses they
sell are in the 49-75K range.

I am doing my due diligence on this group as I am interested in what they have to offer and would welcome any comments. As I am a cash flow investor I realise that properties in the Country are unlikely to get great capital gains. However, I have done my number and most of the properties are positivelly geared to the order of $20-$30 per week before factoring in any depreciation.

Cheers,
Sash

 

[asy]

Sash,

I have no idea about the company or what they are like, I just wanted to comment on the lease arrangement.

Be careful with this type of lease, it ceases to be a residential lease once it extends past 5 years. It is now a commercial lease, and subject to the COMMERCIAL legislation, NOT the residential tenancies legislation.

This means that you have different rights and responsibilities.

I'm not saying don't do it, it may suit you! I am saying look into it further before you do take it on.

Also, have you considered that it may be quite difficult to resell, should you ever want to, with this type of lease in place.

hope this helps,

asy

 

[geoffw]

Originally posted by asy
Be careful with this type of lease, it ceases to be a residential lease once it extends past 5 years. It is now a commercial lease, and subject to the COMMERCIAL legislation, NOT the residential tenancies legislation.

Asy, how does that affect DHA leases, which are typically 9 years?

Also, have you considered that it may be quite difficult to resell, should you ever want to, with this type of lease in place

As well as reselling, it can also affect the valuation. My DHA place would be valued at up to 10% higher if it were available for an owner occupier. The market is restricted to other investors. That extra 10% valuation I could have used to buy another property.

 

[asy]

Originally posted by geoffw
Asy, how does that affect DHA leases, which are typically 9 years?

Good Question GeoffW... I believe you will find that these are in fact commercial leases.

The subsequent lease between the DHA and the tenant is a residental lease, however.

asy

 

[XBenX]

try here :

beep

 

[tonyd]

Originally posted by sash
They guarantee that the property will be tenanted up to 25 years (5x5x5x5x5 lease option).

A 3125 year lease!

sash, if you haven't already, you should check out the latest issue of API magazine which has a great article about banks selling their buildings off with 5+5+5+... or 3+3+.. leases in the '80s and '90s, and subsequently not taking the option to renew.

cheers, Tony

 

[sash]

County Homes - Thanks

Thanks for all your reponses. I am going on the trip this weekend to check out these properties but will be definitely be asking a lot of questions based on you inputs.

Cheers,
Sash

 

[James1977]

What does DHA and LVR stand for?

Please excuse my ignorance...

 

[Jamie]

Originally posted by James1977
What does DHA and LVR stand for?

Please excuse my ignorance...

DHA = Defence Housing Australia

LVR = Loan-to-Valuation Ratio

 

[geoffw]

DHA provide housing for defence personnel. You buy a housae, usually from them, and you lease it to them for 9 years (sometimes 6). You have a guaranteed tenant for the time- in return, they take 15% management fee.

My question to Asy was regarding the house I have, and whether that lease is commercial or residential.

My question to Asy now is, that as a commercial lease, how does that affect me? The bank regard it as a residential property, otherwise I would not have a loan.

LVR = Loan to Valuation Ratio. Typically the bank will only lend you up to 80% of the value of a property- that 80% is the LVR- without incurring LMI (Loan Mortgage Insurance).

 

[Gozooo]

Originally posted by asy
Be careful with this type of lease, it ceases to be a residential lease once it extends past 5 years. It is now a commercial lease, and subject to the COMMERCIAL legislation, NOT the residential tenancies legislation.

This means that you have different rights and responsibilities.

Hi,

I would like to ask what "different rights and responsibilities".

I have previously owned a residential IP, but was looking at commerical that had the 5+5+5, noticed this thread and wondered what else I should be considering with commerical property investment.

If anyone could suggest some good links with information I could available myself of, or even just give a few pointers here I would appreciate it.

Thank you
Cathie

 

[asy]

Originally posted by Gozooo
Hi,

I would like to ask what "different rights and responsibilities".

Simply that you will have different rights with respect to evicting non-paying tenants, and you will have to maintain the property to a different standard.

If you want to have a look at the legislation, go to www.austlii.edu.au and search for the approproate legislation in the state you invest in.

hope this helps,

asy

 

[Peter Noake]

DHA leases between DHA and the tenant are not normal residential leases under the relevant state RTAct. They are special leases raised under the Defence Act which are similar to Residential leases, but not quite the same.

Pete

 

[geoffw]

Peter, What are the differences between normal residential leases and DHA leases?

I'm guessing that normal residential leases can be cancelled given normal notice, but DHA leases cannot.