(edit: split from this thread: H&L in new estates ) Hey question @tobe .....I remember you and Jake from Qura (now with Empower Wealth) saying you can't make money on H&L land in new estates.....still hold that view? Have a look at prices in Werribee now.....
I updated a post about rockbank recently. Bank had short Val'd last year by $20k. Land now due for release and new val put the land $15k and build $20k higher. Did it 'make money'. Clients held that deposit for two years, if they had bought just about anything else in Melbourne during that time they would likely have made a similar (10%) gain. Granted they didn't have to pay a mortgage, or receive rental income during that time. Also the builder usually has clauses that allow them to increase the contract price when land is delayed, so some of their increased val will get eaten up there. My perspective is probably skewed. I have worked in financing new homes. I have seen a lot of val issues, dodgy developers, crap builders and gullible FHBs and first time investors. I don't have a lot of experience in newly built estates 2 or 5 years later when the infrastructure is in and the values change. historically values only increase in new estates once the surrounding suburbs are built out and the suburbs closer to town start to increase. Has that changed lately? Not sure.
Wow well that is news to me just about everyobe who got into rockbank 2 years ago has made 40 to 70k on their land. It looks like your clients bought direcrly off a builder. They load on the land and housr. I am consistently making 25 to 30% on my deals within 18 months
Land $175k bought mid 2015. Build $228k. Valued $190 land and $240 build So you were buying land in rockbank for $130 to &160 in 2015? It's no big deal, like I said in my earlier post, I am not a h&l investor, I've just worked in the field for a long time. When I started I was writing loans to buy in Berwick, Narre warren and Lyndhurst $250k. Land 100, build $150. Prices have changed a lot since then. But in general it's hard to find outliers, vendors who are motivated to discount when almost all the vendors of unregistered land are development companies. Similarly it's hard for vendors to hold out for more when there are literally hundreds of similar blocks for sale in neighbouring suburbs. I've seen a lot of people in here talk about packages as if the land is owned by the builder. This is actually very rare. Building takes a lot of capital, builders don't want to be buying land. Sometimes they organise an exclusive agreement with land developers to be the only advertiser of certain blocks, or the only agent for that land for a certain period. But in the end it's almost always two contracts and the builder isn't the vendor of the land. Builders need land to sell their product. Land developers need builders to sell theirs. Usually people can get the best deal by engaging a builder to find the land for them. They know the land available, what the likely site costs are and what sort of house can fit that block and what sort of amendments are required to meet the estates covenants.
Hi folks @sash, @tobe, Slightly off topic I guess, but hoping to get your thoughts around which western suburb might be better right now for a land purchase, seeking some capital growth between now and the time it takes to title (say a year and a bit from now) - Wyndham Vale (10 minutes walk to station) - 400 sqm - $230k OR Melton South (2.8 kms to station) - 400 sqm - $205k OR Rockbank (1 km to station) - 392 sqm - $280k OR Tarneit (1 km to station) - 400 sqm - approx $305k OR elsewhere (North or South East?) Thank you in advance.
To generate growth in that small amount of time frame, your options now are very limited and so is the growth. Try getting on the ground and look for new Estates getting established in any of those areas, but by a Reputed developer. If you purchase land in the very first stages you may get some growth within that timeframe. However if you are after some growth long term(5years+), Tarneit area is gonna be first from that list in my opinion. I've purchased in Truganina in 2015 and already had 80K growth on land when it got settled earlier this year. You gotta get in early stages of an estate to generate higher gain. Always go with reputed developers and make sure development plans have been approved by council.
That's very true. People think they are getting a package. That's not the case. And that is not where the money will be made either. Because packages they offer are usually included of each others commissions. You have to shop around on both land developments and builders separately.
Non one is going to rebate their commission.... They might make an error, they might be running a promotion, but sales people get their money. Would you spend your weekends in a garage half way to Albury for nothing?
(I'm up in Brisbane so I'll try to keep this very generic) "Can't make money" is a sweeping opinion. We've seen some people make great money in a short and long terms on new H&L packages. On the other hand, we've also seen people pay far too much, and we've seen people who haven't made a cent in ten years. I think a lot more needs to be considered outside of the fact that it's a brand new H&L package- the usual; area, yield, cost, etc. Peace of mind (attracts good tenants and things don't break) and great depreciation characteristics have to be weighed up against any premium and "saturated-development" factors. In agreement with some of the above comments- it is HUGELY important to do your due diligence on the land and builders! With the FHBG and council encouraging development booms, the business has become hugely lucrative, attracting all the Cowboys to the swarms of ignorant people. If I may expand on the discussion of packages, They are generally set up between builders and developers, roughly in order of frequency, as; 1. 'Put-In-Calls' between the builder and developer. Builders have exclusive rights over the block of land and a promise to purchase in full within e.g. 3 months. The ideal is they on-sell it to you before they have to settle on it. 2. Allocations from the developer to the builder. Developers might 'give' builders exclusive marketing rights over certain blocks, similar to the above but without the contractual binding. 3. Non-Exclusive marketing. The builder advertises a package on a block they have no hold over. It's often hypothetical because the advertising usually lasts longer than that block of land is available. 4. Spec Homes. The builder purchases the block of land and builds a house on it for you to buy. These are enormously popular with the buyer and not popular at all with the builders, it's quite expensive and risky for them. There are also organisations that functions as builders AND developers, or organisations that partner together on a large scale. They offer the land with a non-negotiable builder and often a fixed package with minimal variances available.
You can make money with just about any property strategy its more about the market conditions where you buy, you can also lose money with just about any strategy if you get the timing wrong and buy close to peak. For those who got the timing right, they probably already accessed equity or sold up.... All the best to everyone, just got to be in it to win and make sure you understand how cycles work. MTR
