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Risk of buying new?

Discussion in 'General Property Chat' started by psylence, 26th Jul, 2015.

  1. psylence

    psylence Member

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    Have been looking at some new townhouses and wondered if there is any downfall to buying brand new as investment to rent out? I've heard a couple of things such as because its new you don't know what building defects could be there.but.I hope that.would be covered by building inspection anyway.
     
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  2. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Depends on your strategy to property investing. For me, the main reason I don't like buying new is because im going to be paying a premium price to some other smarter investor when i much rather be that smarter investor myself, buy something that allows me to add value and then get myself a premium return from someone else, whilst at the same time reducing my own risk and manufacturing my own equity. Been doing this almost since i started investing and I can't say I've been disappointed with the results yet.
     
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  3. Tekoz

    Tekoz Well-Known Member

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    Correct @Leo2413 most of the forum experts here will advise you against "New or Off The Plan" unless, you are living in it for yourselves as your residenc, that's a different story.
     
  4. poeter

    poeter Active Member

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    Should consider the risk of bank under-valuing the property when it completes. This could be mitigated by preparing more cash for the shortfall if it does happen.
     
  5. Big Red

    Big Red Well-Known Member

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    risks of buying new

    1. Building coming in under valued when finished
    2. Poor building materials being used
    3. Work done to a high standard
    4. Depends on location - new area more risk , established area - better from a risk perspective.


    Hope that helps. There are benefits too like dep schedule being easier as everything is new.
     
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  6. jins13

    jins13 Well-Known Member

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    benefit also for NSW resident is the $5k rebate.
     
  7. DareDevil

    DareDevil Active Member

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    What i see is

    Risks --
    1.Pay a premium
    2.Less than ideal in-terms of the quality
    3.High chance of value is lower after the completion

    Advantages
    1.Maximum depreciation value
    2.Access to first home grant given that this is the first home
     
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  8. Chilliblue

    Chilliblue Well-Known Member

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    Another risk (especially in larger complexes) you may be competing for tenants.
     
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  9. Leo2413

    Leo2413 Well-Known Member Premium Member

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    And when 1 or 2 idiots in your building of hundreds sells their unit at terrible price, guess where the valuer is going to look first for comparable sales for revaluation..??
     
    Last edited: 27th Jul, 2015
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  10. blackenator

    blackenator Well-Known Member

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    Not all doom and gloom
    I purchased a vacant block (sydney) in a residential development and built with a home builder and worked out to be a great purchase had over 150k equity gain within 6 months
     
  11. drg86

    drg86 Well-Known Member

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    Yes but building new is very different to buying new.

    You make the profit when building...the developer makes the profit when your buying
     
  12. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    The biggest risk is finance (there's lot of others though like nasty clauses that favour developers, no scarcity/oversupply of rentals, a neighbour selling for a low price affecting your val etc).

    Between when you commit to buy and settlement day, your circumstances may change (lose job, have kid, get married, become sick/injured etc), the lending rules may change, rates may change, the market may change (in a downward direction) bla bla.

    That said, you can do well buying OTP.

    But when it comes to investing, I'm not a casino kind of bloke.
     
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  13. Michael_X

    Michael_X Mortgage Broker Business Member

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    View property investing as problem solving.

    For example, an old shabby house that needs a new carpet and carpet - you fix that problem and you will be entitled to the reward.

    A bad tenant, you move them on. Select a good PM to get a new tenant in place and the problem is gone.

    If you buy brand new, who has solved the problem for you? Not you, but the developer. They will stand to gain from the deal, and so they should because they solved the problem.

    Be a problem solver, if not then just pray the market goes up. To me, pray & hope isn't a strategy.

    Cheers,
    Michael