Help needed .... we have a 19 unit development in moe vic

Just can't getting the funds to build. Strong rental yields and good depreciation but no pressales and slow market growth. Anyone have some ideas.

 

Devil's advocate here.
1. Depreciation is not a reason to own/invest
2. No presales and slow market to me sounds like a bad development idea - no matter how cheap you got the land for in Moe.
3. It's Moe...

Why are you pursuing such a developmnet that to be frank, sounds like a dog?

 

If there is no demand for units in the area I can appreciate why the bank is staying away.

If you achieve presales will they play ball then?

 

Thanks for your input. It is moe. But strong rental there is a profit in the development and it's a great stepping stone. I do tend to invest when people are saying no. The site is valued at 750k.

 

Yes we will be in a stronger position if we achieve just 2/3 presales. It's just no an area presales have worked. The demand from aging locals will come when we have them built.

 

• What's the build cost and avg sale price?
• What figures and feedback has the agent/s provided at design stage?
• Is it the right product?
• Is it overpriced?
• Are you the first to market?
• Have you got a display suite? Where?
• What incentives are being offered?
• What marketing is the agent doing?
• How long has it been on the market?
• Wrong agent? Get another agent?
• What commission are you offering?
• What project marketing skills/experience have they got?
• What/who/where is your market?
• Do you need FIRB approval to get the ball rolling?

 

Absolutely, unconditionally, categorically do not attempt a development in Moe. Surely all signs are telling you this?

 

How you and the bank are assessing risk vs rewards is probably much different.

 

How much interest you willing to pay ?
I might know a guy who can fund you.

 

13.5 % seems on the money for 6/12 months.

 

I listened to a property couch podcast featuring a lady who had several properties in Moe and was raving about it.

 

Latrobe valley seems to in a heap of **** atm due the power stations shutting down....but there's 100000 or so people in the area there must be other small industries and it's 1.5 hours from Melbourne.

Prices haven't done much in the area...

 

Agree with both comments. Parts of moe are government dependant. So one of the power stations closing won't effect moe as much as Traralgon where most workers would come from.
Value comes from developing and longer term rental. I do appreciate everyone's feedback.

 

@Eddie72 - any response to the questions above?

 

I still don't see a financial argument as to why it would be strategic movecto develop in moe..

Issues in downturn in big industry.

Slow population growth

Aging population

No growth in wealth of the General demographic

If house prices are not rising how are older folk meant to sell to downsize into said development

Social issues.

Moe is not like Bendigo, Echuca or other regional hubs. Sale itself was on my radar for a long time but it too suffers from many of the items I mentioned above. It's a RAAF town.

So I am willing to be told otherwise and curious to know why you wish to engage in a development such as this in moe. Could you please share your pitch (not sales pitch), but if I was to go into partnership with you on it, sell the deal to me...

 

Was she trying to get you to buy the H&L packages she is marketing?

 

How many presales do you need to achieve? Most banks would consider this high risk and would probably want around 50%.

If you can't achieve even 1 then it's either the price and/or possibly the psychological reasons where people want to wait and see it finished before buying. If it's the price then really really look and think about selling the site if the profit just isn't there.

Do you have the option to use your own money first to build 1-2 as display homes so people can see what the finished product will be like or stage the build where you build 5 at a time, sell, do the next 5 etc

 

This is not a great idea, honestly. Even developments right in Melbourne are struggling right now. There is no demand for units in Moe, a massive amount of stock on the market (217 properties in the immediate area, fewer than 30 sales in a month, lots of other recent developers unable to offload their inventory and a huge number of price reductions).

Forget "strong rental" - there is so much stock on the market in Moe that rental demand, if it was high, is going to trend down. I think you're seriously over-estimating tenancy demand anyway, there are quite a few properties for rent in Moe and absolutely no sign of a shortage. It's also a small regional town with limited industry.

I am not surprised you can't get finance. Another thing: investing when people say "no" is not always a good idea (I think you're misunderstanding that idea anyway, it's not about blindly investing where others aren't, it's about understanding markets often overcorrect and get themselves into a selling frenzy, and to therefore keep a close eye out for good value in oversold, fear-driven markets). It's not a replacement for assessing the fundamentals of a market and it certainly isn't a justification for building in Moe. Sometimes people aren't investing in an area for good reason.

 

This clearly isn't the case, or there wouldn't be a bunch of units and townhouses on the market right now in Moe.

 

If you feel this is the case, you're far better off buying some of the existing stock on the market in Moe. Looks like prices are coming down, lots of cheap property to snap up. This would save you a lot of hassle if you feel the area's on the move.