My "Armchair Development" Experience

Builder has apparently started ... but we still have to establish a schedule that we all agree upon.

The builder's twelve month schedule is a month or so later than ours (based on a discrepancy concerning the date the Build Licence was granted).

We are trying to align these two different schedules.

Crido
 
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Hi Crido
Sorry, I don't really understand this, perhaps those with more experience in the build game do???

If I was in your position I would be very interested in finding out what the end product is worth today, not what EOS estimated you would make on completion, especially in terms of bank vals.

I do recall that these units were very small I think 2 bedders at 58 sqm??? Am I right ??

I would also most definitely check out what the estimated rental return will be, as rents in some inner city pockets have fallen back somewhat.

At least there will be no surprises closer to completion.

What will be the total completion time from when you placed your deposit on the table?

Cheers
MTR:)
 
Just a quick update, as I've been super-busy enjoying time with my wife and three-month old baby girl, while still trying to earn a living, study part-time and enjoy some recreation! Phew!

Anyway, the builder has started ... a few weeks back we got some pics of the footings being poured. Not sure exactly where they're up to since.

All investors are getting pre-approvals for finance in place (even though we won't act on these within the 90 days they are valid for). We need this as we're refinancing the building loan and the new lender wants to see that every investor has the capacity to cover build costs and take ownership of their property on completion. I've never been through this process and I'm amazed at the amount of paperwork required! :(

All good!

Cheers,
Crido
 
We're a bit worried about what this news is going to do to the figures for our Perth investment ... the below turned-up on my FB feed from Hotspotting.com.au:

"Hotspotting on Safari - senior writer Bob Wilson reports: Perth is facing an over-supply of rental accommodation as WA?s economy slows. Almost 900 new apartments were added to the market in the June Quarter and many now under construction will be completed just as Perth?s once-booming economy slows. Online magazine WAtoday reports that while Perth has previously had a shortage of housing, a series of multi-residential developments under construction could force the city into over-supply. Real Estate Institute of Western Australia (REIWA) research manager Stewart Darby said the risk of oversupply by 2015/2016 is a real possibility, with new supply being completed but demand, particularly for rental stock, falling as population growth slows. Gavin Hegney of Hegney Property Group says there has been another wave of redundancies in Perth, most of them in the resources services sector. Hegney says some of the people who have lost their jobs came from the UK seeking work. If they leave the state or return home, this will further weaken demand for rental property. RP Data says that Perth inner city rents have dropped from a median of $640 a week in May 2013 to $575 in May 2014. Rents across greater Perth were flat over the same period."

Should we be concerned?

Our property will be new. It's inner-city. It has equity built-in to the purchase price.

The end-result may not be as glossy as we first hoped, but we're hoping now that the pros will still outweigh the cons, especially in the long term. Similarly, we're hoping it doesn't cost us too much/anything to hold on to it, until the market picks-up again, it grows in value, rents increase and it becomes the positively geared investment we'd planned on from the outset!

Your thoughts?

By the way, we've experienced MORE delays ... with the build schedule 10 weeks behind so far. :O

Cheers,
Crido
 
There was this recently WA Today

REIWA recently warned homebuyers there were too many high-density developments around Perth and they would be overvalued once on the market.

It said thousands of inner-city units were currently being constructed and there would be a huge oversupply once complete.
 
Should we be concerned?

Our property will be new. It's inner-city. It has equity built-in to the purchase price.

The end-result may not be as glossy as we first hoped, but we're hoping now that the pros will still outweigh the cons, especially in the long term. Similarly, we're hoping it doesn't cost us too much/anything to hold on to it, until the market picks-up again, it grows in value, rents increase and it becomes the positively geared investment we'd planned on from the outset!

Your thoughts?

By the way, we've experienced MORE delays ... with the build schedule 10 weeks behind so far. :O

Cheers,
Crido

Concerned? Yes. Panicked? No.

Any long project is affected by the market going up and down. Everyone in Perth is in pretty much the same boat having to adjust their expectations of rent.

However I consider the smaller developments will still be more popular than the giant ones.
 
We're a bit worried about what this news is going to do to the figures for our Perth investment ... the below turned-up on my FB feed from Hotspotting.com.au:

"Hotspotting on Safari - senior writer Bob Wilson reports: Perth is facing an over-supply of rental accommodation as WA?s economy slows. Almost 900 new apartments were added to the market in the June Quarter and many now under construction will be completed just as Perth?s once-booming economy slows. Online magazine WAtoday reports that while Perth has previously had a shortage of housing, a series of multi-residential developments under construction could force the city into over-supply. Real Estate Institute of Western Australia (REIWA) research manager Stewart Darby said the risk of oversupply by 2015/2016 is a real possibility, with new supply being completed but demand, particularly for rental stock, falling as population growth slows. Gavin Hegney of Hegney Property Group says there has been another wave of redundancies in Perth, most of them in the resources services sector. Hegney says some of the people who have lost their jobs came from the UK seeking work. If they leave the state or return home, this will further weaken demand for rental property. RP Data says that Perth inner city rents have dropped from a median of $640 a week in May 2013 to $575 in May 2014. Rents across greater Perth were flat over the same period."

Should we be concerned?

Our property will be new. It's inner-city. It has equity built-in to the purchase price.

The end-result may not be as glossy as we first hoped, but we're hoping now that the pros will still outweigh the cons, especially in the long term. Similarly, we're hoping it doesn't cost us too much/anything to hold on to it, until the market picks-up again, it grows in value, rents increase and it becomes the positively geared investment we'd planned on from the outset!

Your thoughts?

By the way, we've experienced MORE delays ... with the build schedule 10 weeks behind so far. :O

Cheers,
Crido

Hi Crido


"Equity built into the purchase price", this is the figure the developer/builder estimates/values each apartment at the time of pre-sales, its not a given, the market dictates the price.

With OTP stuff my concern would always be end value.
First thing I would do now is check comparable sales as I have mentioned previously, what is the value of your apartment in today's market, comparing same size of apartment and similar location?? If you have this information at least you can plan ahead.

I think the location and the smaller number in the block is in your favour, this is good.

I would most certainly expect that the rental estimate originally provided will now be lower. Rents in Perth in general seem to have softened from what I can see. I would contact a couple of PMs who deal with inner city apartments and find out what this market is doing and current rental returns. There are always ways to increase rent, fully furnished should achieve higher rent.

MTR:)
 
Armchair Development

I'll be as restrained and as politically correct as possible - DO NOT DO IT.

The market dive aside - my personal experience is that the performance of this type of developer in WA is as bad as you can imagine.

12 months completion projection of 12 months = actual 2 years +
Construction finance at greater than credit card rates
Initial cost estimates blown away
Communication is dreadful
Construction quality average - with issues already post settlement

So much so that I find it unconscionable that they can still be marketing anything. BUYER don't BEWARE, just DON'T.

All the best CRIDO - I feel your pain
 
Push, sorry to hear. There certainly have been a lot of alarm bells re their projects.

How high were these interest rates??
 
Almost three months since my last update ... and spurred-on to write another after the last two posts with worrying reports! :O

Anyway, ground floor walls are almost finished. First floor slab pour next week hopefully, and they might (but I'm not counting on it!) have the roof on by Chrissy!

We've been stuffed-around by one finance mob, so have had to stick with the more expensive option. This means each investor will more than likely have to inject further funds before the construction is complete! :(

Not great news, but at least there is action on site!

The original timeline estimate has almost doubled now - out to about 2.5 years!

Cheers,
Crido
 
How much is this more expensive option? I'm amazed these clowns took do long to organise finance and the did a bad job of it by the sounds of it.

Is it double brick construction? If so there's no way your roof will be on by Christmas, they also have to let your slab cure
 
Almost three months since my last update ... and spurred-on to write another after the last two posts with worrying reports! :O

Anyway, ground floor walls are almost finished. First floor slab pour next week hopefully, and they might (but I'm not counting on it!) have the roof on by Chrissy!

We've been stuffed-around by one finance mob, so have had to stick with the more expensive option. This means each investor will more than likely have to inject further funds before the construction is complete! :(

Not great news, but at least there is action on site!

The original timeline estimate has almost doubled now - out to about 2.5 years!

Cheers,
Crido

I drove past the site on Wednesday and checked in to see how it was going

First floor slab will need to cure for at least 4-6 weeks so brickies won't be starting until the mid Jan but it's a pretty good time to get a slab as it can cure over the tradie break.
 
Almost three months since my last update ... and spurred-on to write another after the last two posts with worrying reports! :O

Anyway, ground floor walls are almost finished. First floor slab pour next week hopefully, and they might (but I'm not counting on it!) have the roof on by Chrissy!

We've been stuffed-around by one finance mob, so have had to stick with the more expensive option. This means each investor will more than likely have to inject further funds before the construction is complete! :(

Not great news, but at least there is action on site!

The original timeline estimate has almost doubled now - out to about 2.5 years!

Cheers,
Crido

That is exactly the same story we had - I call bullsh*t re the finance. Ask for a copy of the correspondence they've had from established lenders knocking them back or speak to a couple of lenders yourself. Higher interest rate, massive blow out in time frame = $$ for someone.....
 
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