Opinions on this purchase....

Just wanted to get people's opinions on this. Got an opportunity to purchase a townhouse that is part of a subdivision involving 22 properties on a vacant block of land. I would be purchasing the property at wholesale price around 340k and have been advised that the projected value of the property once built will be around 400k. I have to put down an initial deposit for the land and then pay in total around 50k which will include costs for subdivision, etc. Before building commencing I have a further 25k to fund for building so all up the cash I would have to pay for this project would be 75k.

This would be my first property as well. The good thing I felt with this project is the money I pay up front is garunteed to be returned if let's say council doesn't approve the project for whatever reason.

Thanks in advantance for your replies.

 

What's the approx. price for townhouse in the area? Can you buy better with the 75k?

Sounds like a group I got newsletter from a long time ago

 

Who's the developer and what are their past completed projects?

 

Your being asked to fund the development. That's novel.

Is that even legal?
Your basically becoming an investor in the development.
Did they give you a PDS?
In OTP sales your not allowed to ask for more than10% deposit and it can't be released. In Vic anyway.

Smells fishy to me.

 

In addition to whats been already said above, i'd be asking to know how is your 75k guaranteed if the development doesnt go ahead? Is it secured via a caveat on the land? Or is it just an agreement between your and the developer?

I'd always be cautious with these type or 'investor' deals as you really have no control over the $$ you have invested. You're pretty much at the mercy of the developer.

 

I would not take their word for it when it comes to the 'end value'.

 

OTP....first IP....
land isn't subdivided yet. .....
promise of money back.....
developer calling it 'wholesale price'....
promised valuation on completion...

Run Forrest Run!!!

 

If you are buying an option to purchase a block of land, run for the hills!
Totally unsecured and no comeback when it goes bad!
Learnt this one the hard way!
Cheers PP

 

I echoe the words of the above PCers. RUN!

 

Oh dear, doesn't sound great. What contracts have you signed? Where is it located and who are the developers? I hope you haven't lost your deposit if you pull out...

 

According to whom? I'd be very wary of this.

 

I agree with @Caltan

I have concerns you have been asked to pay more than 10%. In Vic that makes it a terms contract. Danger danger. Run a mile or consult your conveyancer/solicitor or both.

I know of people that have entered into arrangements like this in their pasts and they never saw their money again. They also never got to own the property they signed to acquire. Run fast.

 

Opinion as requested - Sounds dodgy as.

 

@EN710 Prices seem to vary, there's a number of new dwellings selling for less and some selling for more. All townhouses with 3 bedrooms, 2 bathrooms and garage.

@Caltan The only thing I've received is a letter of garuntee plus Scopes of Work Agreement.

@USC I haven't signed anything yet.

Within the 'scopes of the work agreement' the total im being asked to pay upfront is just below 50k. However on the overview for this project the overall 'cash funding' for the investment is 75k. I'll find exactly what this additional amount is and why I'm being asked to pay it. There is a garuntee that they include which is a 100% money back garuntee as per the Scope of Works Agreement.

Thanks everyone for the responses, much appreciated.

 

@teetotal Developer is called PSCA I haven't looked at any projects theyve completed as of yet tbh as I've only just found out about this project.

 

Is the guarantee provided by the same company you provide money too? Is this an SPV? Or is it Thiet core business company?

All very well providing guarantees but if the guarantor has no money the neither do you.

 

@Caltan Yes the garuntee is provided by the company I make the payments to. They have found the land for one of their clients and the project won't be outsourced. They'll be using their own architects, builders etc. It's basically all 'in house.'
Sorry I don't know what an SPV or a Thiet core business company is. If it helps this is their website.... http://propertysubdivision.com.au

 

Sorry iPhone mistake. Is it thier core business.
SPV = special purpose vehicle I.e. A fresh company for this project alone. I.e if the project goes broke then how can it pay the guarantee???

I used to drive past this company everyday, it's been around a long time see if you can find good or bad info from Somerset, Google, ACCC. Think the owner drives some pretty nice cars Bentley or Rolls from memory not that that means anything just an observation.

 

It all sounds quite suspicious. Feel free to send me a pm for my contact details and I would be happy to have a brief look over the documentation that has been provided and give you my opinion (as a Queensland property lawyer not VIC).