OTP and completion timeframes

Hello,

Signed up to the forums a few weeks ago and have been doing some reading/searching since then.

We're getting ready for our first IP and are considering OTP versus established properties.

A question about OTP: Do their contracts normally contain timeframes for completion? I've spoken to a developer/marketer and they talk in terms of 12 months, but would that be written into the contract? What's to stop them taking my deposit and then sitting on it for 2+ years?

Regards, Gary
 
There are usually timeframes written in. These time frames vary, from 12mths + + +
Many OTP do take 2+ yrs. It is usually a timeframe to start construction, in my experience - although may be a timeframe for completion. It is usually in terms of will be started in 12months, but construction will start no later then 18mths (for example).
 
Hi Gary,

You will find the contract contains fine print that allows all sorts of delays on the builder side, but you have to be ready to settle regardless.

Cheers,

The Y-man
 
watch out for a potential kicker clause.... whereby if there is a debate about the validity of the contract the developer can just collect the deposit and it is up to you to litigate to get it back!
 
Thank you for the input so far.

Gary

Would you please list the reasons as to why you say you are considering OTP versus established.

Jezza

Hello jezza,

This will be our first IP and so were looking at the reasonable alternatives. I know that purchasing OTP isn't favoured by many, but it's an option. If, as it appears, the buyer wears a lot of the risk and pays a premium for the privilege then we mightn't consider it for long ;)

Regards, Gary
 
Gary

I would consider it for about 2 seconds then find out how much you were going to spend, go to the Real estate sites, search for existing dwellings and buy one of them, you will be able to add value to them that OTP can not offer for many years. Don't get suckered in by marketing spreadsheets, guarenteed rents, timeframes for finishing and how much money you will make via depreciation.

Jezza
 
Gary

I would consider it for about 2 seconds then find out how much you were going to spend, go to the Real estate sites, search for existing dwellings and buy one of them, you will be able to add value to them that OTP can not offer for many years. Don't get suckered in by marketing spreadsheets, guarenteed rents, timeframes for finishing and how much money you will make via depreciation.

Jezza

Thanks for the advice Jezza. I think I've come around to that viewpoint.

Regards, Gary
 
I would consider it for about 2 seconds then find out how much you were going to spend, go to the Real estate sites, search for existing dwellings and buy one of them, you will be able to add value to them that OTP can not offer for many years. Don't get suckered in by marketing spreadsheets, guarenteed rents, timeframes for finishing and how much money you will make via depreciation.

Oh, I don't know. Most of the OTP deals that come across my desk these days are positive cashflow.

Some are better than others, of course, and it is a somewhat different game to the usual established resi market. That said, the part about being aware of the rules and understanding exactly what you're getting yourself into, doesn't change.

I attended a rather interesting 'debate' in the last week or so, between a buyers agent specialising with OTP and a project manager who helps people reno established properties. Two very different strategies, certainly. But there are always numerous ways to skin the proverbial, and for some, that may include OTP.
 
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