Off the Plan VS older?

[economist99]

Just bought my 2nd off the plan apartment and would be intersted in views from everyone.

Both I bought in rising market of Sydney - first for 475k, a 1bd in city centre. I still haven't paid a cent (interest on deposit refunded) for it after 3 years and it's probably worth over 600k by now - will be mine at year end. Undecided whether to flip or rent out. Seems quite a good deal for no work and no stamp duty at the time.

Lane cove going nuts and old 3bd, 2bth flats going for over 900k. Bought off the plan similar for 990k - brand new of course - TBC in 2 years.

Am I missing something here? I have a good eye for rising markets and very good knowledge of Sydney (and zero reno skills so not interested in renos of older flats or dealing with overpriced Sydney tradys), but aside from that, why don't more people do this?

 

[Redwood]

Just bought my 2nd off the plan apartment and would be intersted in views from everyone.

Both I bought in rising market of Sydney - first for 475k, a 1bd in city centre. I still haven't paid a cent (interest on deposit refunded) for it after 3 years and it's probably worth over 600k by now - will be mine at year end. Undecided whether to flip or rent out. Seems quite a good deal for no work and no stamp duty at the time.

Lane cove going nuts and old 3bd, 2bth flats going for over 900k. Bought off the plan similar for 990k - brand new of course - TBC in 2 years.

Am I missing something here? I have a good eye for rising markets and very good knowledge of Sydney (and zero reno skills so not interested in renos of older flats or dealing with overpriced Sydney tradys), but aside from that, why don't more people do this?

Hi economist, great to hear you have done well on apt 1. I would not touch Sydney, particularly inner-city OTP, which are dominated by Chinese buyers who can afford what we can't, which is prone to valuation issues come settlement. Added to this is the oversupply in the inner city which places an ernormous amount of pressure on valuation. Also, consider as an IP, can you rent it out at a reasonable amount to 'non-students'. The concerns I raise here are exactly the same as the Melbourne market so its not isolated.

Thats just my view, hope it helps

Cheers, Ivan

 

[elmoelmo]

good on you

I am hesitating on buying off the plan only because I am not sure how to evaluate the new property price and some of developers put up the market price very ridiculously.

Do you think it's still ring market or only rising market in lane cove? any other suggestions or tips on buying off the plan.

Just bought my 2nd off the plan apartment and would be intersted in views from everyone.

Both I bought in rising market of Sydney - first for 475k, a 1bd in city centre. I still haven't paid a cent (interest on deposit refunded) for it after 3 years and it's probably worth over 600k by now - will be mine at year end. Undecided whether to flip or rent out. Seems quite a good deal for no work and no stamp duty at the time.

Lane cove going nuts and old 3bd, 2bth flats going for over 900k. Bought off the plan similar for 990k - brand new of course - TBC in 2 years.

Am I missing something here? I have a good eye for rising markets and very good knowledge of Sydney (and zero reno skills so not interested in renos of older flats or dealing with overpriced Sydney tradys), but aside from that, why don't more people do this?

 

[economist99]

I'm not sure what's so bad about chinese buyers from a purely investment perspective? - yes they may sometimes overpay and yes their interest tends to inflate areas (which is why lane cove is already so popular as some priced out of chatswood)...but...I always thought Chinese generally are very clever with money so I'll always pay attention to where they're putting their money. The rich ones that is.

 

[cadence]

Did you manage to get 1br OTP in Sydney centre for $475k 2.5years ago? That's very cheap! It sounds like you paid studio price for a 1br. How many sqm is it? Does it have parking? Good work!

I think you will find that if you paid $475k fair value 2.5years ago for anything in any suburb within say 20km to the city, it would probably be worth around $600k now too. Don't mean to put my boot in or anything, I still think you did very well, just my observation.

Your LC OTP for $990k, I assume it's 3br with water views? ... Did you buy that recently or a couple of years ago? A few years ago, you could still buy a decent house on a sizeable piece of land in LC for $1m which would probably sell for $1.5m now. As 3br apartments edge closer in price to houses, their CG will be a bit more limited. But again, it's a great play to go with OTP if you didn't have a big enough deposit at the time. If you had enough funds to pay 20% deposit & stamp duties to buy a $1m house at the time you signed up for the OTP, then the old house would have been a better play as you would have made much more equity.

OTP can work in strong markets. You've done well as you've bought in rising markets and the equity you have made between purchase and settlement will help fund the deposit with relatively modest outlay from your own pocket.

In exchange for the benefit of making sh$t loads of equity very quickly, there are some potential risks (eg: developers' financial position, building issues, valuation issues, competition when it comes to renting or selling, high strata etc). With any purchase, they can be managed with the right level of DD.

Sounds like you're off to a great start. Keep it up and all the best.

 

[Aaron_C]

I always thought Chinese generally are very clever with money so I'll always pay attention to where they're putting their money. The rich ones that is.

They are clever people but you have to understand the mindset. In any major city in China people are paying $20,000 per sqm for apartments. They come here and see land selling for $5k per sqm, they think it's an absolute steal. You and I may not agree with that assessment but there you go. It's the Japanese in Gold Coast all over again.

 

[Redwood]

They are clever people but you have to understand the mindset. In any major city in China people are paying $20,000 per sqm for apartments. They come here and see land selling for $5k per sqm, they think it's an absolute steal. You and I may not agree with that assessment but there you go. It's the Japanese in Gold Coast all over again.

Agree Aaron, and now when you head to the GC is the Chinese, great comparison.

 

[sash]

Economist99

I live in Lane Cove...not too far from where they are building new apartments....you are not going to like what I have to say...

I believe a that a 3 brm unit bought now is at the top of the market. It is also not good that that the Lane Cove market is being driven by the Chinese.

The comparison of Japanese to the Gold Coast market seems to be prophetic.

The foreign Chinese buyers have very little know of the fundamentals of Australian market. They are being marketed to by project maketeers...I see correction coming around 2017-2018.

I plan yo buy what these buyers back for 60-70 cents on the dollar.

Also be very aware if this happens you will be in dire straits if value drops to 800k...potentially you may also not be able to fund it if the banks decide this is a no go area for units. This has happened before....

By the way I live in a 3 brm, 2 bath, and 2 garage unit in Lane Cove which is 155 sqm of living with 35 sql garage. It is now worth 750k. Townhouses are selling for 900k.

Did you buy one of the ones at the top end of Mowbray Rd?

Just bought my 2nd off the plan apartment and would be intersted in views from everyone.

Both I bought in rising market of Sydney - first for 475k, a 1bd in city centre. I still haven't paid a cent (interest on deposit refunded) for it after 3 years and it's probably worth over 600k by now - will be mine at year end. Undecided whether to flip or rent out. Seems quite a good deal for no work and no stamp duty at the time.

Lane cove going nuts and old 3bd, 2bth flats going for over 900k. Bought off the plan similar for 990k - brand new of course - TBC in 2 years.

Am I missing something here? I have a good eye for rising markets and very good knowledge of Sydney (and zero reno skills so not interested in renos of older flats or dealing with overpriced Sydney tradys), but aside from that, why don't more people do this?

 

[mgs4]

There was an interesting webinar on Real Estate Investar on Tuesday evening which spoke about the differences between a new (off the plan) property and one a few years older. The differences in depreciation you can claim is very small, so the pitch that you need to buy off the plan to get your depreciation doesn't hold, its normally just pushed by spruikers who get the best fees from selling top dollar off the plan stuff.

 

[Truly Exotic]

Put it this way, its like a new car,

when you get a new car, its brand spanking new, its shiny, its got that new car smell,
fast fwd a few years, your new OTP is second hand, all the luxuries of brand new are gone, and your apartment is no different to one a few years older but you paid a premium for it,

fast fwd another 5-10 years, condition wise its the same as the older one, however you paid more for most likely a smaller place

and depreciation difference will be not as big as some of the spruikers suggest.

no point in paying $50k extra for an extra $5 k in depreciation per year for 5 years

 

[Giuseppe]

For whatever it's worth....

I have always been dubious about buying OTP; I've seen people lose their shirts. Being somewhat conservative, I've always invested in older style houses and apartments here in inner Melbourne and it has paid off. From Federation to Art Deco, these type of properties are scarce. I have been able to manufacture equity and body corporate fees are modest compared to many new apartments.

 

[Mark Coburn]

Off-the-plan strategy a good idea or not?

Off-the-plan is primarily a capital growth play, so due diligence is fundamental.

Sure, in todays market every property you are buying today should be positively geared (after tax), but at the end of the day, the main advantage Off-the-plan gives you is a couple of years capital growth with only 10% deposit and no mortgage to service in the sort term.

But, just like any other investment property purchase you need to "know" what the market is doing and why.

With a Off-the-plan strategy all you have done is move your commitment into the future. As a result you need to be a little more sure of yourself as an investor before committing to a mortgage a year or two in advance.

As an Off-the-plan investor you need to fully understand what the market is going to do over the next 5-10 years, and only way to know is by doing your due diligence. The only sound reason to buy Off-the-plan, that I believe, is to do so with the knowledge that the key capital growth drivers (in that area) are trending up.

Off-the-plan due diligence is not a weekend attending a property show or 40 hours of hard core "internet research", real due diligence is 12 months of statistical information gathering and many days on the ground research inspecting completed projects by the same developer you intend to buy from. It takes that long to really know whats going on in an area and most importantly "why" the area is doing what its doing.

Investors who have lost their shirts buying Off-the-plan just didn't do their due diligence or simply don't know how to do it, it's as simple as that.


Mark Coburn - Dip Financial Services
Stepping Stone - Property Analysts - Buyer's Agents
e: [email protected]
m: 0405 243 547
o: 302-306 Bong Bong St, Bowral, New South Wales.

 

[The Y-man]

Put it this way, its like a new car,

True, but it may be a brand new car that has been manufactured very poorly, so you may be constantly going back and forth to the dealer to get things fixed.... and worse it is the tenants (if it is an IP) that hase ot bear the brunt of the inconvenience waiting for tradies etc.

The Y-man

 

[Mark Coburn]

and many days on the ground research inspecting completed projects by the same developer you intend to buy from. It takes that long to really know whats going on in an area

Y Man, That might be the case with a Skoda or a Fiat, Due diligence is everything when you are considering an Off-the-plan purchase, so you need to see the developers product after it has been rented for a couple of years (or your going in blind).