House and Land Packages

[banipal753]

I'm a first time investor with little knowledge about the market and PI, but i'm working on it and doing a lot of research into potential for growth.

I've been advised by many to steer clear of House and Land packages, as i'd be forking out the repayments for the duration of the period to which i cannot rent it out (as it's being built). Is this true? Is there anyway to defer the repayments so that they start once the property is built and ready to be rented out?

Also i understand land size is very important, a lot of the time more important than the structure, and i'm concerned that a lot of house and land packages tend to be built on 350-450m2 land masses, which isn't really worth the 6-700k price tag.

Appreciate the advice in advance.

 

[NPB]

I'm a first time investor with little knowledge about the market and PI, but i'm working on it and doing a lot of research into potential for growth.

I've been advised by many to steer clear of House and Land packages, as i'd be forking out the repayments for the duration of the period to which i cannot rent it out (as it's being built). Is this true? Is there anyway to defer the repayments so that they start once the property is built and ready to be rented out?

Also i understand land size is very important, a lot of the time more important than the structure, and i'm concerned that a lot of house and land packages tend to be built on 350-450m2 land masses, which isn't really worth the 6-700k price tag.

Appreciate the advice in advance.

Would is your strategy? What are you trying to achieve?

What attracts you to house and land packages?

Often you can buy them "off the plan' rather than land and construct, which means no interest until complete, however that is far far far far far away from being the number one consideration in your case.

Good Luck

 

[banipal753]

Would is your strategy? What are you trying to achieve?

What attracts you to house and land packages?

Often you can buy them "off the plan' rather than land and construct, which means no interest until complete, however that is far far far far far away from being the number one consideration in your case.

Good Luck

This is hopefully the start of a 20 year journey into building an investment property portfolio. I'm looking at buying cheap and renting it out, hoping to have considerable capital growth over a 5-10 year period.

I'm attracted to house and land packages because of the potential for cap growth in new area developments, the high demand for rental properties in these areas and because they're aesthetically appealing. There's a few areas i've got my eyes on which appear to be in the early stages of a boom

It sounds like you're suggesting there are a lot better options than a house and land package. Would you suggest an older property for my goals, or perhaps a unit/townhouse?

 

[NPB]

This is hopefully the start of a 20 year journey into building an investment property portfolio. I'm looking at buying cheap and renting it out, hoping to have considerable capital growth over a 5-10 year period.

I'm attracted to house and land packages because of the potential for cap growth in new area developments, the high demand for rental properties in these areas and because they're aesthetically appealing. There's a few areas i've got my eyes on which appear to be in the early stages of a boom

It sounds like you're suggesting there are a lot better options than a house and land package. Would you suggest an older property for my goals, or perhaps a unit/townhouse?

Always exceptions to the rule, but personally I would never do a house and land package, especially in a new estate.

For me, established properties in established areas are much preferred. New growth areas with unlimited land going forever kills you on the demand and supply scenario and the vast majority of the value is in the building which is a depreciating asset.

Good luck

 

[Brian84]

Hi banipal,

What areas are you look at house and land packages. I know of some areas where you only have to put down a deposit to hold the property than you don't pay anything else until the house is complete.

3 of our family friends all purchased one of these properties and didn't have any problems.

I also know a company that does house and land packages. Send me a private message if you would like more info. I think he has some that are already built which might help you out.

 

[banipal753]

At the moment, i'm really flexible on location, my research is leading me to areas that are within reasonable distance to either a major city, or to suburbs that surround a suburb which has already boomed. Basically i'm looking to take advantage of a ripple effect of growth, I'm referring to realestate.com.au, their invest tab shows median price and annual growth% so i'm basically going off that.

Any direction i should be looking in particularly?

Thanks for the help guys, you've been really informative

 

[NPB]

At the moment, i'm really flexible on location, my research is leading me to areas that are within reasonable distance to either a major city, or to suburbs that surround a suburb which has already boomed. Basically i'm looking to take advantage of a ripple effect of growth, I'm referring to realestate.com.au, their invest tab shows median price and annual growth% so i'm basically going off that.

Any direction i should be looking in particularly?

Thanks for the help guys, you've been really informative

Just be careful with stats, they can be distorted by so many factors.

If you were my brother I would be afraid for your first purchase, we are buyers agents so we of course are biased, however you show signs that you really need help to avoid making a big mistake, why not use a BA (Not us) for your first purchase and really get involved in the why, where and what of the properties they suggest, learn to understand the criteria, then going forward you can use this if you choose to run your own race. The first IP is in my opinion the most important purchase and lays the foundation for future purchasers, get some help on the first one.

I am certain 99% of all BA's will try and talk you out of house and land but if they can't many can get a developers rebate ( what the developers pay marketeers to flog this stuff) paid to the purchaser so the BA's fee for finding the best of a bad bunch of house and land packages would be covered and perhaps even some surplus in your pocket.

Good luck

 

[Aaron Sice]

H&Ls work well when you're putting something different on the ground.

I know someone doing H&Ls and attaching a granny flat to each one.

Sash on here has done a few, strategy is always the same - buy when sentiment is low, construct as sentiment rises and sell/rent out when market is established and on trend.

Just be sure not do a 3x2 s if everyone else is doing them, likewise 4x2 s etc...

 

[Tano]

Aaron, so i assume you need >450sqm. What size are the granny flats and primary houses and what size is the parcel of land is this guy developing?

 

[MTR]

I'm a first time investor with little knowledge about the market and PI, but i'm working on it and doing a lot of research into potential for growth.

I've been advised by many to steer clear of House and Land packages, as i'd be forking out the repayments for the duration of the period to which i cannot rent it out (as it's being built). Is this true? Is there anyway to defer the repayments so that they start once the property is built and ready to be rented out?

Also i understand land size is very important, a lot of the time more important than the structure, and i'm concerned that a lot of house and land packages tend to be built on 350-450m2 land masses, which isn't really worth the 6-700k price tag.

Appreciate the advice in advance.

if you don't get the timing right you are stuffed because when the market is flat there is oversupply and sub divisions can go on for years, check the stages, how many and demand, are blocks sitting on the market or do you need to beg??.
Its easy to tell what is happening.

If its a rising market, bingo you will make money, however in a rising market you make money regardless, so if you are going L&H in a rising market you would want to be building at least 2 or 3 due to building timeframe, otherwise stick to buying a home in metro without the hard yards.

 

[Truly Exotic]

holding costs should be a secondary consideration,

primary consideration would be whether there is growth or not in your kind of situation

 

[cimbom]

Always exceptions to the rule, but personally I would never do a house and land package, especially in a new estate.

For me, established properties in established areas are much preferred. New growth areas with unlimited land going forever kills you on the demand and supply scenario and the vast majority of the value is in the building which is a depreciating asset.

Good luck

This x1000.

I know of several cases where people purchased in new estates and later sold at a loss. You pay a premium for "new" and anyone that buys in those kinds of areas will want a new house as well because there is still land available to make it possible.

 

[Big Will]

I personally would never want to buy a H&L package.

You pay a premium for land to give you an example there was a 350m2 block my wife (was gf at the time) was looking at and they said the value of the land was 300k in Epping yet my 550m2 in Watsonia (closer to the city more established) was on the council rates at 300k too!

Another example Doreen was a new housing estate and people were buying a block for 200k and spending 200-250k on the house and after a year or two they were selling for 350-400k (loss of 50k) as people were seeing better value elsewhere.

The final reason I will mention (there are more) but relevant to your situation if you are buying to rent it out. Think of supply and demand, lets pretend they are building 2,000 on year 1 and 50% are bought by mums and dads as investment properties, this means that when all the homes finish there is 1,000 homes up for rent. Lets say 50% get rented on day one and you were one of them (you would of had to drop your rent to secure the tenant as they had 1,000 properties to choose from). Most rental agreements are for 12 months so when that period is up again lets pick 50% will move closer to the city leaving 250 properties on the market all in a month! Which again pulls your rental yield down.

Same with selling too except if you take the average family will live in a property for 7-10 years imaging what happens in 7-10 years for the other properties when you look at selling...

Compared to established areas that have gone through this cycle for a number of cycles 50 year old suburbs a property could have changed hands anywhere from still the original owners to 50x (although highly unlikely but it could have changed hands 10x). Which means there is less properties for sale or rent at a given time.

 

[SUNNYBILL]

I have concentrated on only doing investments in new estates and have done very well. Knowledge is the key and you have to do a lot of research on both the land and builders.
I never buy a house and land package as there is always an extra margin in there with the builder. I prefer to buy the land first and then shop around the builders and see who will give me the best price and inclusions. It's amazing how competitive they are when they know you have the land purchased and are not a tyre kicker. I would anticipate you save $15k plus by doing this and not buying a house and land package.
In relation to land I generally target the first stage release in new estates as these are often priced very competitively. This strategy has held me in good stead. Also target a specific area of the market, then you can really get a great knowledge of the area you are investing in. (I target Perth, coastal, 40km plus north of the city).
Finally, once you have the knowledge be aware that some people will tell you that there is no money to be made in what you are doing and you are investing in the wrong areas. That is usually because they have blinkers on. There have been a lot of negative posts on the investment opportunities in the new housing areas I invest in. I like these because it deters others and means I have an easier task in securing the land.
My equity gain on houses over the last 10 years has been between $60k and $180k (based on bank valuations and actual sale prices) . Average house and land cost (including all costs) is now about $370k. I sometimes sell on completion and other times keep as they are positively geared after tax is taken in to account.
Hope this helps. Knowledge is everything.

 

[cimbom]

Council rates valuations are not that accurate. In many established suburbs, blocks of land (or knock down rebuilds) would sell for close to the value of land with a useable house in it simply because the supply is just not there. I experienced this when looking for our PPOR 1.5 years ago.

 

[Jk200sx]

I never buy a house and land package as there is always an extra margin in there with the builder. I prefer to buy the land first and then shop around the builders and see who will give me the best price and inclusions.

Interesting! I've done something similar in the Brisbane Bayside area. Bought the block of land, got a builder in to build it. I've done to so far, but land is limited in the areas that I've been doing this - BTW, these are in established suburbs. First prop was 260K land and 285K build for a 4 bed highset. The second was 235K for Land and 230K for a 4 bed/ 2 car lowset. It was built just on 2 yrs ago, and it currently returns 560/wk. A valuation was done ~ 6 months ago, and I was able to pull out 64K equity, ready to use in an offset account.

 

[Loony]

H&l

Depends where you are, I am on my 4th HL (4th IP) and always done well with it. it is cash positive when complete and 10%+ capital growth.

HL allows you to buy in the future, buy now and house will be complete in 18 months time, less stamp duty, tax benefit, the marketing from the developer which attracts people...

I think there r many plus in HL

to get good established home as investment (generally you have to attend auctions, many open homes... ) I find those much harder to find.

 

[ej89]

What's your budget? I know some people who have made more money on new homes being built than established homes on bigger blocks.. Click on the ponds thread on where to buy section and thats just one example.

I'm not too worried about too much land as long as developers don't release it all at the same time and it's a desirable area that will have people continually wanting to buy.. If you look at SW and NW Sydney there are tons of estates and house and land values keep going up in them because many people want a new home in a new nice area compared to paying similar price for an old home in an older area just because it has an extra 150sqm of land.

You can make money on any strategy if you buy smart and this forum will show you that. Ask advice from the people who have done well in that and not guru's on here who do reno's etc cos they have their own strategy.

 

[banipal753]

If i stick to Sydney, my budget will be north of 500k, i've been looking at Oran Park, Edmondson Park and Middleton Grange, which have boomed well beyond my budget, and offer only small parcels of land (280-320), which I don't necessarily prefer.

The over supply of vacant land in these new estates is turning me off going ahead with this option, and I've since reconsidered H&L packages. Not to say its out of the question, i still monitor what's available, but i may need to look interstate if i want to find something affordable.

 

[ANDREW H]

H&L you can possilby wait a long time for the growth. You also have risks of your house being the same as everyone eleses and valued accordingly. If there is a distressed sales in your estate that will bring priced down and not up.
You should look at being different to others on the street if you must go H&L.

If you are buying in excess of 500k that is a large amount for your first buy. I would sugggest starting small, get a good team on board, Mortgage Broker, Accountant and map out a plan. Also think about using a Buyers agent and just factor their numbers in. I personally have adopted the buy, hold, and prey strategy and it only works in a growth market and you must have a lot of indicators on board and know what you are doing