OTP buying - Fortitude Valley -2016 completion

Discussion in 'The Buying/Selling Process' started by Poe, 11th Nov, 2014.

  1. AlmostBob

    AlmostBob Evil Landlord

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    used car dealers
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    spruik the honesty of their businesses
    for the same reason

    there are multiple threads on this forum about OTP
    none about successful ones
     
  2. JDM

    JDM Property Lawyer

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    You are yet to provide any logical reasoning to support your argument.

    I have no issue with people having different investment strategies, however people should at least provide some logical basis so that the original poster can make an informed decision. Talking about Amway and new BMWs doesn't really help anyone.
     
  3. kamchatsky

    kamchatsky Member

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    I noticed in the link provided that Mirvac is building apartment in that area as well. Mirvac has a good reputation and my REA friends said (for Sydney) the Mirvac units holds value pretty well even in a sea of units around them. Have a look at the Mirvac prices, and if it is the similar pricing as Ironfish one, you may as well go for Mirvac, if you still want OTP units.

    http://unison.mirvac.com/

    Or you can go for Mirvac Art House at South Brisbane (I have no idea about Bris Vegas suburbs so please don't ask me which suburb is better) as 2 bedders starts at 544K.

    http://arthouse.mirvac.com/

    Most importantly, Mirvac won't provide you with rental guarantee so that should please all these somersofters (only a little hehe).

    I think OTP properties can be a good strategy with potentially excellent additional tax benefits, but you have to pick the good from the ugly.
     
    Last edited: 13th Nov, 2014
  4. mikezen

    mikezen Bigmember

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  5. sumterrence

    sumterrence Member

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    I acknowledge JDM has verified most of the mis-statements there, and just wanted to add some more knowledge into the OTP development.

    The reason why people pay 10% of the price and hold it in a trust account (usually they do a bank guarantee by opening a term deposit in a bank that cannot be touched until both party agree to release the money). The developers can then show all the bank guarantees they received to the bank to support that they have already secured a number of buyers for their project so the bank can continue lend them money, other wise the bank will back off and the project will left un-finished...and that's the reason why sometime we see OTP selling at a discounted rate and even throw in furniture just to lure people to buy them so the developers can continue the funding. ;)
     
  6. CosmicTrevor

    CosmicTrevor Member

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    Hey there Poe, I have bought two OTP apartments in Brisbane this year. I was also encouraged to do multiple transactions but using my SMSF rather than relying on equity growth. I was recommended developments in Bowen Hills and Fortitude Valley, I didn't buy any of those recommended to me, instead I chose my own. One in Newstead and one in the inner West.

    In your situation I would only go OTP if you can get an apartment with features that distinguish it from those in the development and others nearby AND you get it at a good square metre rate. My advice is to compare against 2B in Emporium as it is the closest development. By all means add a premium to account for the age difference. You could also compare to Mosaic and M&A.

    Also be careful with Medians, they are ok for macro considerations (city / suburb) choice, but just because you buy under the median doesn't mean you are going to get good growth.

    Also, add $50,000 to the list price if it doesn't have a car park to make comparisons easier.

    The developments that were recommended to me had 250+, 300+ and 1000 apartments respectively. The developments that I bought into had 72 & 15.

    I would personally not buy a unit in one of larger developments simply because of the lack of scarcity, when you are trying to tenant or sell you are likely to be competing against many other in the same development.

    Also be careful with the apartment sizes. There are a lot of 65-72 sqm 2B apartments being built (that includes a small balcony). I'm not convinced these apartments are that liveable. While this might not matter so much for a tenant, you might struggle to sell to an owner occupier which is where you are more likely to get capital growth IMO.

    Buying 5 in 5 years would scare the hell out of me, but I am conservative. I am very sceptical that you will get enough equity growth in 12 months to fund the next property.

    My advice;
    1) go to Brisbane, walk around FV and Newstead and get a feel for the place. To me Gasworks has a good vibe about it.
    2) walk down Ann St and compare to existing buildings
    3) choose your own lawyer.
    4) slow the process down, do your own research.

    Good luck
     
  7. Morbius

    Morbius Member

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    The most common way of "breaking the contract" is for the developer to delay completion/settlement to past the date in the sunset clause, annul all contracts and invite the purchasers to cough up a higher price. Technically a breach of contract but very hard to prove and not worth litigating in most cases.

    It is certainly not common, but by no means as rare as it should be.
     
  8. Richard Feynman

    Richard Feynman Mortgage Broker

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    Rare though it is, I have read contracts which were quite clear in their sunset clause (among other clauses). Essentially:

    "If we don't complete by x, we reserve the right to rescind the sale and remarket the property and you have zero say. Oh you also agree that all fixtures, fittings, the actual size and shape of your apartment, the number of dwellings in the complex, your levies etc are all subject to change as we wish. And you have no say there either.

    Wait, we almost forgot, all the pretty computer generated images are 'artist impressions' which means they may represent reality, but not perfectly. Maybe like a model who has been photoshopped/airbrushed for a magazine cover. Perhaps the view of the city skyline you see out the window on those images may in fact have been blown up to double its actual size and maybe the private balcony you have will actually be overlooked by neighbours when we change our DA to incorporate more apartments after we have approval.".

    ..yeah.
     
  9. Big Will

    Big Will Member

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    Another reason why I don't touch OTP
     
  10. JohnHenry

    JohnHenry Mister

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    Is it because it is over supply and higher pricing due to the marketing fee ?

    how about if the developer offer a rental guarantee ?

    So far, I see OTP is good for new First Home Owner since they don't have a ny other choice to be subsidized other than buying OTP.
     
  11. Big Will

    Big Will Member

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    There are plenty of threads about OTP and have put my feedback in them.

    Not the over supply but more so it isn't good for investment with 50 units all coming on the market at the same time which means more competition which means you need to drop your rent to secure an early tenant or hope to get lucky. Once the twelve months lease is up you are in competition with other 12 month leases.

    Rental guarantee is a joke, it is inbuilt into your price.

    If the gov gave FHO 100k grant for exisiting houses for PPOR guess what will happy to the prices of FHO properties. Yes they can buy them but if two FHO both have 100k extra then they can both bid another 100k they didn't have before so the winners are the owners... Now translate that to the developers with OTP.
     
  12. JohnHenry

    JohnHenry Mister

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    Yes, that will cause the price to be over inflated again like in 2009 where K-Rudd introduce it to the masses.

    Thanks for the enlightenment :D
     
  13. Poe

    Poe Member

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    Hello,

    Looks like an update I made earlier did not post. I did decide eventually to go ahead with the OTP in Newstead.

    The building is going ahead of schedule which is good. Some large companies have also begun to move their HQ to Newstead which hopefully means good rental candidates.

    This time next year, I guess i'll know if it was worth it.

    This is the building I bought in: http://www.news.com.au/finance/real...ched-in-newstead/story-fndbalka-1227193560891
     
  14. Syd Investor

    Syd Investor Member

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    Take a look around the Brisbane CBD area and look at the cranes in the sky all building OTP properties. These will all be due for completion in the next 12-18 months so ask yourself what will make you unit so unique from all the others being built?

    I'm sure the glossy brochure shows you will make capital growth and will never be vacant however do your own due diligence.

    I'm all for buying established properties but that's a personal preference.

    Cheers
     
  15. JohnHenry

    JohnHenry Mister

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    Does it have a rental guarantee as well ?
     
  16. Poe

    Poe Member

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    I did check the area and saw the various projects going around. With the various companies moving their HQ to this suburb and that the other projects were simply high-rises with no frills, this seemed to be a good buy. I also complied a list of questions from this thread and others and was happy with the responses. Yes, there is a rental guarantee as mentioned earlier.
     
  17. JohnHenry

    JohnHenry Mister

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    which suburbs was that ?
    I was also offered in Coomera QLD 4209 for a H&L package 3 bed 2 bath 1 car for $429k back in 2011

    Glad that I didn't took that offer by JDL Strategies.
     
  18. MIW

    MIW Member

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    OTP, IMHO, inferior because:
    - you don't know what you are getting, greedy developers can change the fixtures and fittings on you, can vary plans and redevelop common areas, can build next door and take your view, can ask for more money in rising market (some), can alter and provide alternative car space, etc...
    - buying brand new means you are paying a premium price for the property, a similar in the area can cost less, and extra equity can be created with renovation potential
    - strata can increase 100% in a year, you don't know the deals, and what developer retains as a %
    - basically you do not know exactly what you are getting with the OTP as compared with what you buy at present and have seen what you are getting for your money!
    - you do not know the % of owners to renters
    So just some of the reasons...
     
  19. MIW

    MIW Member

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    Can some investors state whether it is a fact or opinion they are recommending? Where have they bought OTP, when for how much and what growth and experience they had through the process? I would be interested to know that........thanks.
     
  20. MIW

    MIW Member

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    IMHO, great to live in but a very poor investment. I am wondering what the strata costs will be for maintaining all those amenities? I hope your ROI stacks up! Best of luck.....