OTP as an investment strategy - feasible?

[Crido]

Hi all,

Just wondering ... hypothetically, if one was to invest (solely) with the likes of:

http://360projectmarketing.com/ (or similar mobs)

... with OTP developments similar to the ones they have on offer, would this (as a strategy) pay-off?

Seems to me that it might not (or, then again, it might) - obviously the numbers would need to be crunched for each and every development/investment.

And, no, I don't have a vested interest - although I realise their web hits will increase with this post.

I've "crunched the numbers" on their Milton development and the returns don't seem that great (although, growth might be the carrot - no?).

Cheers,
Crido

PS: The fact they have muzak on their website is a tad tragic.

 

[Shahin_Afarin]

Google Somersoft and OTP - plenty of stuff there both pros and cons.

For me most OTP's are a good case of amputating potential for CG.

Regards

Shahin

 

[Crido]

Google Somersoft and OTP - plenty of stuff there both pros and cons.

For me most OTP's are a good case of amputating potential for CG.

Regards

Shahin

Righto ... I kinda anticipated this sort of response.

So, without any sort of developer incentive, why are there so many otp developments that keep springing up?

If they're that much of an ordinary investment, who is buying them?!

Cheers,
Crido

 

[Aaron_C]

So, without any sort of developer incentive, why are there so many otp developments that keep springing up?

Because the developer needs to get pre-sales OTP to even begin construction as part of their banks' requirements.

People buy OTP because they want to secure a property for the future by paying a small deposit now at today's prices. Plus, they may want to have an input into the colour scheme of the interior and they may also be attracted to things like stamp duty savings and first home owner grants.

 

[Shahin_Afarin]

Righto ... I kinda anticipated this sort of response.

So, without any sort of developer incentive, why are there so many otp developments that keep springing up?

If they're that much of an ordinary investment, who is buying them?!

Cheers,
Crido

Believe it or not there is a strong market for OTP. This is a combination of overseas buyers, buyers with a certain lack of understanding on the pros and cons, buyers that want to buy new, investors that think serious negative gearing is fantastic because it will reduce their tax bill and give no consideration to CG.

Regards

Shahin

 

[Noodle]

OTP often looks good on paper when you look at premium rental returns for new, large depreciation benefits etc which is why they are so popular. In reality from an investor perspective, you have to understand there is a developer and marketing premium associated with such projects and this can often sacrifice the initial few years of capital growth even if in a good area.

You also need to consider that often OTP developments are in an area along with other OTP developments seriously increasing the supply side, and subsequently diluting the demand side.

"IF" you are capable of picking when a market is about to rise OTP can be great, the operative word though is "IF" and as such becomes more speculation than investment.

 

[Crido]

All good comments - thanks!

 

[Rolf Latham]

Feasible or fallible


if you assess the risks of the individual project OTP can be a good form of equity growth

tarolf