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Is buying a land and sell it before settlement a good strategy??!!

Discussion in 'General Property Chat' started by vip_leo, 31st Jul, 2016.

  1. vip_leo

    vip_leo Member

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    One of my friend is a Real Estate Agent and tipping me off to purchase a block of land in newly developing Estate in West of Melbourne - Westbrook, Rothwell or Elements.

    As per his advise if I book the land (350-400 sqm) worth approx. 240K by paying 10-15K as deposit and which is due to title/settle next year (in 8-10 months time), and sell before it gets settled then I can easily cash up 15-20K by then. He has couple of his clients doing it often.

    Developers usually do increase the prices for same block of lands with each of their stage releases, so his advise sounds logical but still I'm in doubt, that's because after becoming member on this Forum few days ago I've been reading so many threads regularly but haven't come up anyone following such strategy!!! so it doesn't seem advantageous.

    Any ideas or further tips !!!????

    Thanks
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Have you factored in GST and stamp duty? income tax on the sale?

    What if you cannot resell? You will need to be ready to settle.
    What if your purchaser cannot settle? You will need to be ready to settle.
     
  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    Small return after taxes, not worth the risk or timeframe.
     
  4. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    If the land was being on-sold at a decent margin then it would be ok - but as the guys above has mentioned, there's not much return after costs are factored in.

    Cheers

    Jamie
     
  5. Player

    Player Well-Known Member

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    What if it doesn't rise in value? Will you be happy to settle and hold the block?
    Will you build on it? Or, leave it idle?

    What if it's actually worth less in 18 months time? Do you have the entire $240K to settle?

    There are easier and more liquid ways to lose your money than risk settling on a block of land for miniscule upside. :cool:
     
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  6. Big Will

    Big Will Well-Known Member

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    What if prices rise but then all of a sudden there are 30 blocks of land that are sell how will you compete with them?

    Even worse if the prices remain the same or lower...
     
  7. MTR

    MTR Well-Known Member Premium Member

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    this works well if the stock is low and the market is booming, otherwise too much risk for too little gain
     
    Last edited: 1st Aug, 2016
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  8. Brady

    Brady Well-Known Member

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    Risk v Reward = Answer
     
  9. Cactus

    Cactus Well-Known Member

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    I've done this with success. But it helps if you know what your doing and you buy several not just 1. You also need to be prepared to settle the lot. It may be getting a bit late in the market upswing of Melb to do this though.
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I did it too successfully - but I think I was just lucky.
     
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  11. vip_leo

    vip_leo Member

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    Thank you all for taking your time to read this and give your valuable inputs..... I got my ans. and that is..... it's certainly not a good strategy, at least for novice like me.
     
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  12. sash

    sash Well-Known Member

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    It could work...but you need to be able to settle if you can't sell....I would also write in a 4-6 week settlement period.....rather than the standard 2 weeks. You need to be careful with this strategy but it can bring in rewards.

    The land I bought at Officer (about 280sqm) has gone up from 144k to almost 190k in 8 mths. There is money to be made for very little effort.
     
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  13. ashish1137

    ashish1137 Well-Known Member

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    I booked land in stage 2 with a good builder in november 2014 in Melbourne outskirts. Currently 5th stage is going, lot is yet to be titled and similarly sized block has gone up by 15k.

    Total value 160k, paid only 8k till now. But i think am just Lucky (I'd say) as that was not my intention . :)

    I recently was made aware of a chinese investor who just book lots. He was fortunate enough to gain more than 30% on total value invested, 200% on his investment (@10%) on 80 booked lots in Sydney market around 2013-14 and gained fortunes out of it.:)

    Regards
     
  14. Hodge

    Hodge Well-Known Member

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    Too risky for me unless the cash was burning a hole in my pocket. Not enough reward for the risk .
     
  15. alexm

    alexm Well-Known Member

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    I've also done this however the returns could have been maximized if I held onto the land for longer. It's not something that I do on a regular basis however if the opportunity arise i'll take it.