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Discussion in 'Introductions' started by Linda in May, 24th Jul, 2015.

  1. Linda in May

    Linda in May Member

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    Hi there, this is Linda.

    I am currently living in Sydney but buying properties in Sydney and Brisbane and I may choose properties in Melbourne in the near future.

    I focus on brand-new apartments and off-plan apartments only as I only need to pay 10% of the price when I sign the contract (and I have more time to prepare for my loan if I buy off-plan ones). And other costs like strata fees is more affordable to me. Brand-new apartments also helps me with negative gearing.

    Well, I know that buying apartments is a long-term investment but I do not want to wait too long. I need to see prospects of an area so I will choose the location of my properties carefully. I need tenants to pay the loan and interest for me.

    My plan is to buy several apartments with my own bank savings and loans from refinance. When I get older and do not want to work anymore, I would like to sell some of them to pay off the rest. In that way, I would be able to lead a comfy life with my rent.

    Hope to discuss any issues with you all here.
     
  2. Azazel

    Azazel Well-Known Member

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    Hi @Linda in May , how are you going?
    Where abouts in Brisbane are your IP's?
     
  3. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    Welcome Linda :)

    Where are your current properties? When did you purchase them? It's always interest to see people's portfolio.

    I was wondering what you mean about the strata fees being more affordable to you. More affordable than..?

    Ever considered buying established properties which do not contain a profit margin in the purchase price? Might help you retire sooner.
     
  4. Linda in May

    Linda in May Member

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    Hi Azazel,

    I haven't been to Brisbane so I do not know the exact address. I just know it's in Newstead.
     
  5. Linda in May

    Linda in May Member

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    Hi Steven,

    I have one in Brisbane and one in Parramatta, NSW. I bought them just this year as I am quite new to the property market.:)

    As for the costs other than the price, I mean I do not want to deal with gardens, swimming pools and some other facilities in houses. Apartments seem to be cheaper.

    Thanks for your advice:)
     
  6. The Y-man

    The Y-man Moderator Staff Member

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    Hi Linda,

    I only pay 10% of the price when I sign the contract for existing properties - I would imagine that would be the case regardless of OTP or not? o_O

    The Y-man
     
  7. The Y-man

    The Y-man Moderator Staff Member

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    Hi Linda,

    Buying an off the plan or brand new apartment can actually be a longer term investment than existing properties - mainly because:

    1. You are paying an inflated price compared to rest of market (i.e. for the profit margin of developers, sales people, etc etc)

    2. You cannot value add

    The Y-man
     
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  8. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    I see. You would prefer not to have maintenance costs of a house. Keep in mind, houses don't have strata fees/body corporate so often upkeep costs can be similar.

    How'd you chose the suburbs and the apartments you purchased? I'm always interested to know :)

    Y-man makes some good points, too.

    New apartments are products with built in profit margins (developers don't work for free) so if your goal is to not wait too long, it may be worth considering buying some established dwellings too, which don't contain a premium in the price and generally have the ability to add value with renovation if you really want to turbocharge your wealth creation.
     
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  9. Linda in May

    Linda in May Member

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    Hi Y-man,

    Thank you for your explanation. But according to one of my friend's experience, the price of such properties will rise obviously within 3 years.

    And new properties are helpful to negative gearing.

    All the best,
    Linda
     
  10. Linda in May

    Linda in May Member

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    Hi Y-man,

    Well, what I really mean is that I would have more time to apply for a loan if I buy an OTP.:p

    All the best,
    Linda
     
  11. Linda in May

    Linda in May Member

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    Hi Steven,

    I choose suburbs with the help of my consultant because that person helped one of my friends making profit. And that is also why I want to do property investment. Of course, I would also like to hear suggestions from this forum.:)

    Is there any difference between purchasing OTP and established new apartments?

    All the best,
    Linda
     
  12. The Y-man

    The Y-man Moderator Staff Member

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    Ok, thats cool. For me, OTP constitutes some of the biggest risk in property investing. There are people who have got into big trouble when the price of the property fell during the build time, and they struggled to settle (because the bank won't give you the amount you need for the loan).

    With regards to negative gearing, I have found a house in the same location as the apartment will generally have a much greater impact on tax recovery due to lower yields.

    The Y-man
     
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  13. The Y-man

    The Y-man Moderator Staff Member

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    My opinion is that this is the wrong way around. I always apply for the loan (or have a very very good idea what I can borrow) THEN go shopping for the property.

    In any case, for NON-off the plan purchases, you can put in a finance clause so if you can't get a loan, you can drop out of the contract. For off the plan you are stuck - if you can't get a loan, they will come after everything you own......... :oops:



    The Y-man
     
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  14. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    If you're interested in suggestions from this forum, it would be a great idea to post a topic about OTP vs established and solicit input from lots of experienced investors :) You will learn lots and get lots of input.

    The key difference for OTP and established for me, is that I won't buy OTP. The two key reasons are:

    1. I believe I can generally create more wealth buying established dwellings as I'm not paying a developer's profit margin, and I'm not buying one of 20, 50, 100 other identical apartments which can keep rents and price growth low.
    2. Much more importantly, OTP carries a great many risks that established do not (including what @The Y-man has mentioned with finance risk if prices drop) as well as things like nasty clauses allowing developers to changes apartment layouts, fixtures, fittings etc and even have higher-than-stated strata levies upon completion (not that this happens all the time but it is an additional risk).
    On the finance risk in particular, with OTP you are committing to buy something well into the future and things can change in your own circumstances (lose job, have child, pay cut, work accident) but also in the lending world as the recent APRA changes have shown (if banks assess your ability to repay borrowed debt more harshly, it might turn out that when it comes time to settle, you can no longer "afford" the loan in the eyes of the bank and they may not lend you what you thought they would.

    So even for a high income earner, there is some risk in committing to be able to settle on a property 6, 12, 18, 24+ months into the future and much of it is out of the buyer's control–the lending rules can change any day as they are constantly doing at the moment.

    With that said, OTP can work well for some investors but it's a bit too risky and there are too many downsides for OTP to form part of my strategy.
     
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  15. Azazel

    Azazel Well-Known Member

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    Thanks, suburb is fine. That's pretty central, nice one.
    Did you use a BA or did you just do lots of DD before buying sight unseen?
     
  16. Linda in May

    Linda in May Member

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    Hi Azazel,

    I bought it just after seeing the brochure of that property and knowing the prospect of Brisbane.

    I trust that agent because she did help my friend making profit by property investment.

    Cheers,
    Linda
     
  17. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    @Linda in May , ask the agent if they received a commission when you bought the property they recommended and let us know what they say.

    I have a feeling...
     
  18. The Y-man

    The Y-man Moderator Staff Member

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    Actually, the more important point to me is: how do you come to the conclusion a profit was made?

    OTP CG is usually completely at the mercy of the markets - in a rising market, any project will make money for the buyer, but in a falling market..... now this is true for *any* resi property I guess, but the effects are more pronounced for OTP IMHO.

    The Y-man
     
  19. Linda in May

    Linda in May Member

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    Hi Steven,

    Yes, they do receive a commission. Agents work for commission, aren't they? Anyway, it is not me who pay for the agent.

    What do you feel? Am I taking a risk because of buying a property like this?:confused:

    All the best,
    Linda
     
  20. Linda in May

    Linda in May Member

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    Hi Y-man,

    I just see my friend is earning from the rent and the price of his apartment is rising...

    How do you judge if a property worth buying or not?

    All the best,
    Linda