Advice regarding property investment decision

Hi I'm 33 now have a property in Darwin. Unfortunately, I bought in the peak and the price has fallen by 100000. As I'm currently living in the property so its not a big issue as of yet. Following friend's advice(and bit of research) I bought two block land in Melbourne in Trugnina for 275000,350m2, and in craigburn for 263500, 313m2, to be titled in late 2018. Now having put in the 10% deposit for the land I am bit confused if i made the right decision. My plan is to build house and put it for rent. What do you guys think am i going in the right path with my property investment decision. Any suggestions is highly appreciated. Cheers.

 

Do you have the borrowing capacity or cash to settle and build on both?

 

Blocks will be titled few months apart. my plan is to build on one put it out for rent and then go to bank for the other. I had a chat with the finance broker and he recons getting a loan should be ok.

 

How are you going to complete a build and have it rented within months?

 

Prefab home ? Caravan ? Agistment ???

OP, time will tell, but IMO, sounds like you just bought again near peak of market, but worse, you now have to build....x2

 

I have no idea about the specific area you mentioned but Imho to me it doesn't make sense to build a house to rent, UNLESS there was a feasibility done indicating that the risk taken on to build is commensurate with the end value/manufactured equity.

Otherwise it would be far better to just buy established stock to rent without the added significant construction risks.

 

@Sam_hus, what is your investment goal and investment strategy?

How does your actions to-date support your goal and strategy?

 

Friends are wonderful things to have but not someone I would listen to on investment. You need to make those decisions entirely yourself. I personally would not want to have all the debt you are holding. If you are unsure of land value holding then you need to think about whether or not to sell. Getting a loan to build in your case is likely to be difficult, if not impossible.

 

More than one new land and house build. Do you understand the valuation risks?

 

Settling another two blocks of hand in a short period does make me a little anxious. Especially vacant blocks in new developments which are generally considered high risk. I don't know your financials, but perhaps slowing down a bit and taking on one project at a time might be prudent?

Also it appears you bought in the peak in Darwin, it hasn't worked out well for you. The outer Melbourne suburbs have already been in a booming for several years and there's plenty to suggest that it might be at the peak or quite close to it (we won't really know until after it's happened). This can lead to numerous problems such as the land not being worth what you've paid for it (don't even get me started on the construction phase).

@Sam_hus if you're an experienced investor with a large portfolio then I'm just outlining some fairly obvious risks. From the context of your post however I suspect you're fairly new to this and I'm concerned that you've gone from one mistake to an even bigger one, that could set you back for a decade.

I do think there's still plenty of great opportunities in Melbourne, but in my opinion Cranbourne and Truganina are locations that are likely to be hit hard if there's a price correction in Melbourne.

 

Price of land almost doubled here in Melbourne in the last two/three years and FOMO is still pushing the prices up. Now because we want to invest and not speculate, I guess the question is, have you done a bit of DD? Let`s grab Truganina, $275k, house will be $200k, $475k total, what are comparable selling for in Truganina? At $0.5Mil each, is this the best investment you could do? Did you check with you broker you`ll be able to get finance for $1M? Don`t expect the land to grow at the same rate as in the past. The trend can continue but can also retrace.

 

Its not just the amount. Delays in land registration. Delays and cost overruns in the builds. Valuation issues for the loans. Then there are two of them overlapping.

 

i'll be more focus on getting a cheap build on that Truganina block like around 160K mark. so you are be at least below medium a bit and same for craigeburn.

 

Can we see your financial projection ?
What sort of net yield are you projecting for with your rentals ?
Sometimes it is better to have a lower yield on a property purchase when the property is completed and fully leased on a long term lease than a spec build on the anticipation fof a much higher net yield

 

Great advice here already. It's also best to ask before the fact, not after.

I live not far from Truganina, and to give you a comforting thought, land sells out the moment it's released. There's so much FOMO, it's not even funny. I spoke with this guy from the Albright estate in Truganina recently (month or so ago?), he was saying people arrived at like 3am on the day of new release to get first dibs. You've likely made a good decision, but it's risky given you've got 2 builds to do, you don't know for sure if you'll get sufficient finance for it and no one knows how long the craze is going to go on for. Accomplished folks like @sash @Connor reckon there's 6-12-15 months of steam left in the outer wild west in Melbourne. Are you willing to share where you've bought in Truganina, I'm familiar with it like the back of me hand.

 

What and where did you buy in Darwin? How much? Is it high-set or low set? Unit or house? Can make a huge difference to the final valuation.

Ive seen some positive signs in certain areas. Other areas...er...not so much.

Have you had The Darwin place valued professionally?

What are you going to do if you're 200k down with the Darwin property?