Join Australia's most dynamic and respected property investment community

OTP in regional areas?

Discussion in 'General Property Chat' started by username, 1st Oct, 2015.

Tags:
  1. username

    username Member

    Joined:
    1st Oct, 2015
    Posts:
    8
    Location:
    NSW
    Hi forumites, first post here!
    Wanted to see what people's views are of OTP's in regional areas? I know there is a fair bit of disdain for OTP's in general. The one we are looking at is in Ballarat.

    Pros:
    We can buy one right now- we have enough for the 5% deposit and would have enough saved by completion mid next year to cover the additional 5-6%, by which time hopefully the value has gone up a bit
    Massive stamp duty savings
    Good depreciation

    Cons:
    ?

    If you were in our position (DINK excellent salaries but savings currently very low due to two recent property purchases + reno), would this be an option for you? Or should we stop being impatient and save up/ accumulate equity before purchasing? The stamp duty savings are a big one for me, especially in Victoria where it is so high !
     
  2. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    902
    Location:
    Melbourne
    Question - what if the value goes down (a fair bit)?

    The Y-man
     
    Propertunity likes this.
  3. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,230
    Location:
    NSW
    ^^ what he said, plus,
    ....and what if the banks don't want to lend to you with a 10% deposit at the time of settlement?
    and what if you have a change in circumstances? job change? etc and no longer qualify for finance.
     
  4. username

    username Member

    Joined:
    1st Oct, 2015
    Posts:
    8
    Location:
    NSW
    Great question Y-man. In that case, we'd have to make up the shortfall in the loan vs loan value, correct? (So I guess we need to budget that in)
     
  5. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,230
    Location:
    NSW
    OTP only works in a rising market where nothing changes, or it actually gets better, by the time settlement comes around.
    Regional or metro makes no difference to the risks.
     
  6. Azazel

    Azazel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    8,113
    Location:
    Brisbane
    Agree, why OTP and not just a normal house somewhere?
    Shouldn't be basing it on depreciation.
    And if you're concerned about equity, you might be in an even worse position.
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,558
    Location:
    Sydney or NSW or Australia
    What are your risks?

    • Interest rates
    • Other projects in the pipeline (supply)
    • Regional economy (demand)
    • Up the duff
    • Bank policy
    • Sunset clause
    • Plague
    • Pestilence
    • Rising/falling market
    • Loss of employment
    • Illness
    • Change in your circumstances
     
  8. House

    House Well-Known Member Premium Member

    Joined:
    13th Sep, 2015
    Posts:
    767
    Location:
    Sydney
    Last edited: 1st Oct, 2015
  9. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,145
    Location:
    Canberra and Sydney
    Off the plan + regional area + 10% deposit = recipe for disaster IMO.

    I don't mean to sound negative - but it doesn't sound like a good purchase.

    Cheers

    Jamie
     
    Tranquilo likes this.
  10. York

    York Finance Broker Business Member

    Joined:
    24th Jun, 2015
    Posts:
    1,621
    Location:
    Sydney
    Yep...regional areas have their own downfalls as it is. Not saying they can't be a good investment. But can be tricky and can hit your equity growth hard if you don't buy at a decent price at the right time. Add OTP to it, which has also has its cons as mentioned above like Val issues at settlement and it's suddenly getting very dim. Plus OTP in a regional area where land is just everywhere might cause an oversupply if the council gets signature happy on approvals creating more problems on values.
     
  11. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    902
    Location:
    Melbourne
    Come on man, you left out Alien Invasion and Meteor Strike.

    The Y-man
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,558
    Location:
    Sydney or NSW or Australia
    @The Y-man - I'd have mentioned aliens if it was in the outback but we're only talking Bendigo (more likely to be attacked by a pack of drunken bogans on the back of a ute).
     
    Last edited: 1st Oct, 2015
  13. Redwood

    Redwood Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    342
    Location:
    Melbourne
    Hi there, I would be by absolute exception that I would buy in a regional area however I would certainly exclude off the plan.

    The pros you have mentioned are the same as every OTP property however my experience has shown that generally when finance is involved, prices are inflated and bank valuers do not value the property at contract price. That is the con. Don't just focus on stamp duty focus on the actual value of the property and the long term prospects for the area. Generally regional areas don't stack up due to a lack of population growth as opposed to metro areas, I would much prefer to invest in a metro area.

    Cheers, Ivan
     
  14. TMNT

    TMNT Well-Known Member

    Joined:
    23rd Jul, 2015
    Posts:
    1,394
    Location:
    Melbourne
    One key question

    Why otp and not established in Ballarat? ??

    The risks in terms of location and market id the same

    Yes you get more depreciation for a nrw one

    But for every one pro for otp in ballarat there are two to 4 cons for it

    Go established if you thibk ballarat is the one

    Btw i have ones in bendigo and ballarat
     
  15. Beelzebub

    Beelzebub Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    568
    Location:
    Lost
    Are you talking about an apartment / town-house or a house and land package?
     
  16. Richard Taylor

    Richard Taylor Mortgage Broker & Brisbane Buyers Agent

    Joined:
    20th Jun, 2015
    Posts:
    171
    Location:
    Brisbane
    Which part of Ballarat are you referring about.

    Some excellent suburbs and some good established stock down there for sale but not sure i would run with an OTP.

    Cheers


    Richard