Investment Property Agents - again

I have been doing some reading and research into buying my 1st IP in Brisbane area. Couple of weeks back I was approached by one of the Investment Properties Agents who is offering me a house and land package as an investment. The company works as a one stop shop including sales, finance, real estate agent/advisor etc. So far the people we have met seem to be very professional and knowledgeable and claim to be experienced investors themselves. I was told they work with only reputable builders (don’t have any names) with whom they have long relation ship so they have better prices from them. They are also paid on commission from the builder (ultimately by me anyway). We were presented by a “property finance report” and the conclusion was that it would cost me about $30 from my pocket after tax and depreciation. The numbers looked quite realistic on which this was based ($410k property + costs and $380 rent). This week they will take us around few areas with potential development sites.

From reading several threads on the forum I understand that most members are against buying of the plan in current climate. I am still kind of inclined to find some older and cheaper house since I don’t want to commit that much even though I can afford it. What are the pros (brand new, lower stamp duty, more depreciation) and cons (lower value than paid, lower rent than expected, problem finding tenant)? I thought I will go along on Sat and at least figure out what they assume to be the growth areas.

Any thoughts?

Yeah I also could not find too much credible information about the company. They claim to be around for some 40 years?!?

Cheers
 
From reading several threads on the forum I understand that most members are against buying of the plan in current climate.
I have been anti OTP for a number of years and for a number of reasons all expressed in the threads you've been reading no doubt. However, if you are going to do it (OTP) it is best done in a rising market (and I think we are in one of those - confirmed by all the sales data coming out of the abs, rpdata, residex and others)

I am still kind of inclined to find some older and cheaper house since I don’t want to commit that much even though I can afford it. Any thoughts?

Jefred, I agree with you thoughts. Buy older & cheaper in an established suburb with establised services & infrastructure is a winner IMO.
 
To protect yourself use your OWN valuer, and your OWN solicitor and arrange your own finance. There are several very knowledgeable MBs on this forum in Brisbane who would offer you independent advice.

That way there can be no conflict of interest - these people will look at things to make sure you get the best deal.
Marg
 
I actually LIKE OTP, But what you have described rings alarm bells. It never hurts to gather more info - just be careful, Do your own independant due dilligence. Also listen to marg about using your own independant valuer etc.
 
I've been to a few seminars too from similar companies such as you describe. All i can say, get independent advice and don't trust any company that says they can give you a one stop shop.

Go to a separate MB, get your own valuations, do your own research (you can start by asking here). Put it this way, these companies exist to make themselves rich, and they target inexperienced investors and flash fancy cars, football tickets, yearly parties, trips to Brisbane etc as an enticement to get the naive people to think they are on a good thing.

It is in their interest to sell you their services. Not in your interest to buy them as a one stop package deal.

Without naming company names, one such company came apart in Qld last year or so. I heard it was a very stormy affair for the family investors. Another one will leave you for broke and you may have to sleep in the park.


Thanks


g
 
I get concerned that these type of companies need to sell it to you by saying "It will only cost you $x per week". Like that's the most important thing in the whole purchase. If it's a good deal then it should be the best value property not just the fact that it will only cost you a small amount after depreciation and tax based on an ungettable rental income.

Please tread carefully and don't get blinded by the spin. By because it will be the best value you can find. Not that it will be new. Not that it COULD rent at a certain rate. Compare its price to existing houses in the area and please if you decide to go ahead with it get it independantly valued.

Gools
 
The "it only costs you $x per week" line is a complete joke. That assumes that you're taking out a tax variation form, it assumes that the rent is always paid on time and coincides perfectly with your loan payments, it assumes the one off payments like insurance, rates etc are nice monthly or fortnightly payments. It's never that easy.

The suck in a lot of people with that line who thing "Ah, I can afford $50 per week, so $30 will be a walk in the park"... and then find it costing $120 per week, the depreciation not being quite as well, and some months when the rates are due... ooo, that's not $30 per month.

All the adivce on here is good... get your own research done, especially the finance (and especially if they're using a smaller lender becuase they can control the valuation a little bit more than they can with the big 4).

Happy hunting!
 
Thanks everyone for your comments.

I am trying to do the research myself too. Today I got few names where we will be going and by looking at it briefly I like only one of the six suburbs they mentioned. I fully agree with the independed valuation and will definitely get one done if we decide to take things furhther.

I am little bit puzzled by the finance comments. We talked to their finance person and to me it is normal MB. She adviced us how to set up the loans effectively and ended up recommending the big 4 plus some other big lenders.

They of course also claim that the properties are in high growth areas, built by good quality builders etc. so according to them it is a great property.

We will go for a round trip tomorrow so I let you know. I suppose it will not be wasted time since I can learn something new again.

Cheers
 
Hi Jefred

Welcome to the Forum!



Don't worry, I have been on this forum for 8 years and I still get puzzled about all the negative comments and the blanket assumptions that just because someone wears a green coat or works from a nice office that they told you, the punter, a whole lot of porkies 'just to make themselves rich'.


When I was selling serviced apartment in Melbourne CBD about ten years ago we used the Somersoft PIA and there were certainly some buyers whose contribution - based on the information put into the PIA - would be about $1 per week.

Was I a charlaton or a thief? Not that I can recall. Were my customers stupid? On the contrary, these were city properties and attracted some very high net worth individuals earning very significant incomes. But perhaps they were gullible to my charms and dazzled by the city lights.


My younger son has just bought an apartment in Melbourne Off The Plan. The developer is a reputable company, the project manager has, so far, emailed two lots of progress photos, they restructured the bathroom to separate the WC at no extra charge, and this brand new, two bedroom, views to the north and east apartment cost the same as a twenty year old apartment up at the next noisy intersection overlooking a service station.


Jefred, the Company may have affiliates who will assist with finance, property management etc but all they can do is ask if you would like to be referred, they cannot make you deal with anyone against your will

As to having an independent valuation, why bother - your lender will have an independent valuation done to protect their interests, and again, a sworn valuer is, by nature, independent.


What you do is up to you, but I started in Real Estate in 1975 and sorry to say, have met very few sharks in that time - but perhaps I should get out more!

Hope you find a lovely property and it turns out to be a cracker of an investment

Cheers
Kristine
 
The "it only costs you $x per week" line is a complete joke. That assumes that you're taking out a tax variation form, it assumes that the rent is always paid on time and coincides perfectly with your loan payments, it assumes the one off payments like insurance, rates etc are nice monthly or fortnightly payments. It's never that easy.

The suck in a lot of people with that line who thing "Ah, I can afford $50 per week, so $30 will be a walk in the park"... and then find it costing $120 per week, the depreciation not being quite as well, and some months when the rates are due... ooo, that's not $30 per month.

All the adivce on here is good... get your own research done, especially the finance (and especially if they're using a smaller lender becuase they can control the valuation a little bit more than they can with the big 4).

Happy hunting!

Hey, finspec,

I don't want to hijack Jefred's thread

Any maybe your own investments aren't that flash, but my younger son who works at Coles, didn't pay any tax for four months last year - the ATO rang him up after he had lodged the 221D and told him he had overpaid already and that there would be no further tax payable for the rest of the tax year

This boy bought his first property smack on his 18th Birthday - on junior retail wages - and his second on his 18&6 months Birthday, so we are not talking high tax rates here.

Good thing he listened to his sharky real estate agent / mortgage broker Mother, those two graffiti enscribed, low socio income area concrete bunkers were recently refinance at $75,000 capital growth each (yes, that's a combined $150,000 growth) over the past three years since purchase. This year rents have increased again and we expect them to be cash flow neutral and they just keep on rolling along.

Scoffing at all and sundry really is not such a good look.

Cheers
Kristine
 
I have rarely seen house and land packages sold by Investment "agents" ever be worth the selling price.

I am sure there are exceptions.

Have a look at what second hand near new properties are selling for in the area before you jump on in.

An off the plan valuation - for mortgage security purposes -which you source yourself is very important.

Some valuers - used by the developer - will use other off the plan sales .. they shouldn't but they do .. and surprisingly they stack up then. (Actually they are done for the developer letting them know what they will get for the properties selling them off the plan - rather than for mortgage security purposes).

But upon settlement when a different valuation firm does the valuation they often come up short.

Get a valuation done now .. if you wait until settlement you could be in a bind if it is not worth it.

It's a lot easier to just buy off these agents... but you pay for the convenience.

good luck

RightValue
 
So we did the field trip and it was quite interesting. We saw areas where there were no houses built yet at all (pretty weird). We saw an area where the estate was nearly finished and only few blocks left. We saw some huge estates and some really small estates. Overall it was not a wasted time (gives me a good perspective what is going on) but the offered properties seemed too expensive. I really liked one area on North side of Brisbane so I will need to look there bit more closely.

Thanks again for your input.

One more question: How much extra depreciation benefits can one expect when comparing brand new house and say 3 year old house of similar size and value?

Cheers
 
Sounds just like that we are going to do. We live in Sydney and have two different guys out to see us that do the same thing as you advised. One of our friends had got us in touch of one of the guys that she uses and she is now purchasing her third property. He came around last night told us pretty much the same thing and now we are going to go up to Brisbane next week to look at a number of properties before we decide to purchase. I think if you use someone that was recommended by a friend and also to get the bank who is lending you the funds to value the property you should be pretty much ok, just do your research. I wish we would have gone ahead with this 6 years ago when a guy came out to see us then. Also he said he gets his money from the Building company. As Long as I am paying no more money that the property has been valued at I am happy as we are in it for the long term. *Fingers crossed it works out ok*
 
lso to get the bank who is lending you the funds to value the property you should be pretty much ok,



As Long as I am paying no more money that the property has been valued at I am happy as we are in it for the long term. *Fingers crossed it works out ok*


Caroylnn,

How do you know that you will not be paying more than the property is valued at?

If you have a house valued at $500k and owe $200k on it so have $300k equity.

You decide to buy and investment property interstate for $350k.

You are putting no money down, using the equity in your own home.

If the investment property is valued by the bank at only $300k, the bank will still lend you the money, after all the LVR to which they are exposed is only 69% so no LMI issues.

You have said to the bank you want to buy an investment property. All the bank really cares about is their exposure .. in this case it is fine, so they will lend you the money.

Unless you get to see the valuation you won't know if you are overpaying.

I value quite a few properties for banks where the interstate investor is buying the property as an IP sold through these investment advisers .. almost all are oversold ... but I am sure that many of the purchases settle.

I have heard that there are a couple of vendors that some banks just wont lend on because they are oversold properties.

Like I say, have a look at second hand/used properties in the same area .. when you own the property it will basically be a used property the next day.

cheers

RightValue
 
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