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New and off the plan - a strategy together

Discussion in 'Development' started by ripas, 19th Jul, 2015.

  1. ripas

    ripas Member

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    Hi folks

    I have been a member of this and previous forums for a while now and am a daily visitor to all threads old and new so firstly thankyou for the privilege.

    For a long time I have been interested in property however due to financial reasons, kids, life in general investing just hasn't occurred. My wife has never been good with money (a big understatement really) and over the years I have become comfortable with having the "toys" as opposed to reducing bad debt. I tried many times to get my wife to budget and it always ended in arguments so life rolled on with us skating on by.

    Now, my wife attended a wealth creation workshop about two months ago. The workshop was big and flashy with bright brochures and prizes galore. Yep, I was cynical and remain very much so. She signed up on the spot (just under $4k!!) to get this companies help with budget management. Whilst we are only in the early days she has become a budget queen (and substantially reduced outgoing expenditure). So my take on the whole thing is positive at this stage - paying out $4k to get my wife on a savings and investment strategy pathway is worth that money over the long term - there is no way i would have been able to get her on board - the catalyst is this external company.

    I attended a workshop myself from the same company on property investing recently. They have fairly tight criteria about who and what you can purchase (conflict of interest is a very big concern to me). They only promote new and off the plan property. I met perhaps 40 other people who have been using this company and all are very satisfied. If it was up to me i would be avoiding this company but its not - my wife and i are in this together. She only wants to go with this company for a few varied reasons but I do understand that it fits with her psych.

    So we are going with this company, and paying another significant fee, so we can do it together. In the long term the fee will be absorbed and forgotten about but we will be on our property investment journey together.

    So here is the big question. What do i have to be careful of when buying new property / off the plan? Here are my thoughts from reading a few old threads:
    • Lots of due diligence +++
    • Research the property developer
    • Research the quality of the product
    • Research the value of the product

    Please add to my list and provide any advice regarding buying new / off the plan. Please accept that to get my wife and I on this journey together I believe the startup fee is worth the investment.
     
  2. C-mac

    C-mac Well-Known Member

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    I am probably not the right person to ask as I do not purchase off the plan (and never have. That's not to say that I never will, though); but one area that some friends who have been burned before, say to look out for, is the completion date, contractually.

    In fact, the best advice would be to have your solicitor scrutinise the s#!t out of any contract put in front of you. Items like brand of finishes (stoves, cabinetry etc. etc.), and yep, the completion date (and any consequences/things the developer will do or even bonus if the completion date lags beyond the date on the contract). Just my initial thoughts; I'm sure plenty of experienced buyers will fill you in with more!
     
  3. Hodor

    Hodor Well-Known Member

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    If you have been reading PC/SS for some time you will have read about the many pitfalls of OTP properties. Completion dates, finishes, high strata fees, contracts been rescinded by developer to make more cash, oversupply issues (especially if its a large complex) and financing the deal just to name things that spring to mind.

    I'm not saying you can't do well with OTP properties, just seems to me there are a lot of risks involved that you have little control over. If this is absolutely your only entry into investing and it is something you want for your future then good luck.
     
  4. ripas

    ripas Member

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    Thanks for the quick replies. Yes it appears to be my only entry into PI - it may change down the track after we have bought a couple of properties and the wife is more comfortable.

    I'm thinking of steering toward house and land in an area that I like and have done a fair amount of due diligence on at a micro level. This should hopefully mimimise the risk.....
     
  5. monalisa

    monalisa Well-Known Member Premium Member

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    Hi Ripas

    Most on this forum are against OTP.

    Have you considered what comparable established properties are selling for, as well as rental return on this? Would the bank value stack up at purchase price at the end of the build? What if it is not valued at purchase price? If this is the case you will have to come up with the difference $.

    What is the current outlay ie your contribution to the purchase? Are you able to instead buy two established properties to increase your exposure to the Qld market (assuming that is where you are buying)?

    As this is brand new, you will be paying a premium - the price would have factored in their commissions - which could be 10s of thousands of dollars - so you will be lining their pockets.

    What is the upside with this particular OTP?

    Just some food for thought.

    Good luck!
     
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  6. wombat777

    wombat777 Well-Known Member Premium Member

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    Maybe try and get to a Brisbane PC meetup or establish some connections with other PC members from QLD. Where are you located?

    Will allow you to get some perspectives from people that don't have vested interests. In time, you might even get your wife along.
     
  7. CosmicTrevor

    CosmicTrevor Well-Known Member

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    Ripas, I have posted a few times here on OTP, having bought 2 in QLD in the last 2 years I can share my actual experiences with you.

    I'm not sure what startup fee you are referring to, my advice is not to pay anything to join a so called mentoring group or property club. These organisations exist to make money for themselves. They can be slick, convincing and seem like a good way to get started. In my view and I'm sure there are many others here who will agree, there are better ways to get started and this forum (and its predecessor - Somersoft) is the best education tool I've come across.

    The only reason to go with OTP in my view is if (and only if) you can secure a property that has some unique qualities at a fair price in a location that YOU have chosen and researched and are happy with and that you require it to be new for some reason.

    So, if you don't need it to be new, the value isn't clear, you are not convinced about the location and it is just another generic apartment - then walk away.

    The clubs and mentoring groups will have an answer for every concern you raise, remain sceptical and make sure the information you are receiving is factual not just sales speak.

    Here is an example of classic sales speak; "Stunning new luxury apartment in a booming location". It sounds great and when you review all the beautiful renders it is hard not to fall for it. The sceptic will ask;
    • what makes this property stunning?
    • what is luxurious about it?
    • what is the evidence to support the claim that this is a booming location?
    More things to be aware of;
    • Finance - you will not get unconditional approval until title issues and then you will typically have 2 weeks to finalise approval and settle. This is an ugly and stressful process.
    • The property doesn't exist, you are essentially buying a promise.
    • It may never be built or it maybe different to what you imagine.
    • The claim that there are less issues with new properties, this is of course bollocks.
    • Depreciation is available on existing properties as well as OTP.
    • I could go on...
    If you are going to proceed it is absolutely vital that;
    • you choose your own solicitor / conveyancer
    • you consult your own tax accountant
    • you consult an independent finance broker
    Above all, slow down, ask lots of questions, ignore sales speak, look for hard evidence and work with the above people. Consider appointing a buyers agent if you want help securing a property.

    Sorry this is a bit of a ramble.
    Trev
     
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  8. Beelzebub

    Beelzebub Well-Known Member

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    Tell your wife to get on here. Say something such as. "Okay we will go with it if you read one thread a day for the next three months and still have the same outlook about OTP" It seems like her mindset has been changed by this company so your half way there. Now just channel it to the right investment.
     
  9. CountryNSW

    CountryNSW Member

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    Hi, Before reading this forum I read a lot on barefoot investor (barefootinvestor.com) and found his advice to be great for everyday common sense (and avoiding scams). Maybe your wife would enjoy reading that and hence have a more open view about your options . . .
     
  10. Big Will

    Big Will Well-Known Member

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    At the end of the day if your wife prefers to use the company and you proceed with them it is better then doing nothing IMHO. I was at an auction on Saturday and a little old lady (given that I am 6ft lol) told me that she bought her place in 1994 for $95,000, the meidan in this suburb would be mid $500,000. Even if this little old lady paid double (190k) she would of made money by now.

    Obviously if she bought 2 instead of one she would of made even more ;)

    Don't worry I am having similar disputes with my wife about buying a new unit in the city or a new house in an estate 30km from Melbourne, however I guess I tell her as it is and she knows my knowledge is far greater than hers but as long as I explain why and she understands she is happy but if she doesn't she said she does trust me not to do the wrong thing.

    RE you - maybe take her to a PC meet or let her browse the OTP threads here and on SS and see if she is still up for them.
     
  11. Tekoz

    Tekoz Well-Known Member

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    Yes, I always gets tempted and almost buying OTP investment this year, but somehow it is already expensive and smaller in size (in my case Sydney apartment units).

    When you look at SomeSoft forum, there is one user named John Henry who's been researching and asking lots of opinion for OTP type property, the majority of the experts somehow advise him against or not to buy OTP.


    However, if you need to buy one for your own PPoR or to live in by yoursleves, here is the attached document for your due dilligence.

    Hope that helps.
     

    Attached Files:

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  12. Tekoz

    Tekoz Well-Known Member

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    @ripas, May I know where about the location of the OTp unit that you have been offered for in QLD ?

    I've been offered OTP apartments in the following region:

    South Brisbane
    Fortitude Valley
    Sunnybanks
    Coorparoo
    Newstead


    and the most notoriously far-far away in Park Ridge and Coomera for House & Land Package:eek:
     
  13. Travelbug

    Travelbug Well-Known Member

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    Some great info already provided above.
    Good on your wife for making taking the leap. And good on you for backing her. If it gets you on the right track, all is good.
    In addition I would say to check that the company are not building these OTP themselves (conflict of interest) or if not I'd ask what their commission from the builder is, if you buy one (again conflict of interest).
    Are you willing to name tjhe company? Even if not google them. You will soon find disgruntled people. Read all, but be aware some people pay money thinking these companies will do all the work for them so some complaints may be overstated. As mentioned- google Off The Plan. That will keep you busy for many hours.
    Keep reading here, there is a wealth of information. Get your wife addicted to this site. It's easy to do. LOL
     
  14. Tekoz

    Tekoz Well-Known Member

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    yes, and don't forget. WHen you see the offer "Rental Guaranteed", please say thank you and move on mate.

    That is sounds too good to be true.
     
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  15. ripas

    ripas Member

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    I should mention our first two purchases are through our SMSF. We have not signed up yet (I am still trying to convince my wife that there are better ways - look at this thread on Somersoft honey ;).

    The company (that will remain un-named) only recommends new property - they spruik that new property is a better investment (less headaches long term apparently ....).

    I have been trying to get to the next Sunshine Coast or Brisbane meetup. I was also thinking of ringing someone like Rolf in Brisbane. Thing is this unnamed company provides lots of education on mindset and support - both these things are probably worth a fair bit by themselves and is the bit that my wife has the interest in. She doesn't really care about property types or the figures and is happy to leave that to me.


    Thankyou these are my thoughts exactly - I dont see the point in doing it alone. Maybe once she is comfortable on the mindset and support we will look to other options.

    Cheers for the advice. Google and many hours searching turns up very little. We also did a recent workshop with lots of folks and i asked heaps of couples who are all very happy. In short its not the money for the fee that concerns me (having my wife on track / addicted to budgeting, having support and mindset workshops are all something of value) its more about being restricted in property choices.
     
  16. wombat777

    wombat777 Well-Known Member Premium Member

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    Just explaining this:
    • the rental guarantee is factored into the price you are paying
    • if you buy at the same time as many other investors in the same development, you run the risk that when the rental guarantee runs out of not being able to achieve the same rental return as the guarantee ( this can take some people underwater on their investment and hence they sell )
    • pricing that you paid may not represent actual value of the property ( because of kickbacks and rental guarantee ) - that can mean that anyone that finds the need to sell is selling at below the price they paid
     
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  17. Tekoz

    Tekoz Well-Known Member

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    Yes I agree, therefore for a great investment or place to live location like in Breakfast Point, NSW the builder Rose did not offer rental guarantee.
     
  18. CosmicTrevor

    CosmicTrevor Well-Known Member

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    Well mine were via an SMSF as well. The complexity and risk ramps up again. SMSF loans are harder to get approved in the 14 days you will be given to settle. This 14 days includes non working days, you will have to prepare yourself for requesting a settlement extension. The organisation you work with will say something like; "don't worry, we've done this before - we control the process, it won't be an issue". This is bollocks. You are at the mercy of the lenders and how the developer will react if you can't settle on time. This is one of the reasons I won't do OTP in my SMSF again - the hassle isn't worth it.

    Also, if they give you the impression that running an SMSF is a simple care free process then run not walk away. Read the ATO documentation, understand your responsibilities before you do it.

    If you have more questions PM me.
     
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  19. CosmicTrevor

    CosmicTrevor Well-Known Member

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    By the way you hit the nail on the head when you said..."its more about being restricted in property choices". This is a huge issue in my mind, you are just being shown a bunch of properties that they make a commission on. Ask them what their commission is on the deal, if it is more than the standard then ask why and then ask yourself can this be justified?
    In my case the commission was over 6% which is a lot of extra $ that you are not making on the deal.
     
  20. sash

    sash Well-Known Member

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    Nah....Sind2.......Tekoz...aka....John Henry has converted me to buying a 900k unit in Pazzamatta!

    I love lining other people's pockets....;)

     
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