Seeking advice - Considering H&L packages in Redbank Plains (QLD) or Springdale Heights (NSW)

Thanks everyone for your feedback

I think I might ask them to just handle the finances and I can do my own research and find a property, including a visit to the area and talk with local agents

 

Warning lights are flashing.... Spruiker alarms sounding....

I reckon you have made a good call by posting here. Or maybe you posted here because your own alarms were faintly sounding....

It could of course be a false alarm.....but I'd be treading very carefully.

 

Well being a novice initially it all sounded great, they showed us a video of the Springfield Lakes development and it all looked very impressive.

After being offered the options I then started doing some research, which involved reading articles, looking on realestate.com and of course this forum (along with the old somersoft forum). After reading a fair bit I started having concerns about the whole H&L approach, which I guess as you called it was some faint alarms bells ringing.

Given the overwhelming response in this thread it seems I should be very wary of this group, however is it not ok for property groups to recommend new H&L packages to prospective investors? I mean I assume that's how these H&L packages get sold right?

Definitely considering my options though and thinking about just locating the property myself, particularly as I'm comfortable with the area and feel like I can now narrow it down

 

H&L packages can be fine, this deal might be as well however to determine this you will need to look at land prices in the same suburb. Find out about build costs for finished houses including fencing, driveways, aircon and all fixtures etc. Then you will see if there is a third party margin added in.
Check out prices for 3 year old houses here and see if building sacks up, there will always be a premium for new but the upside is more depreciation, higher rent and hopefully no or little maintenance for a number of years.

 

House and Land packages can be ok, if they meet your strategy and you feel they will help you get to where you want to get to then they should be considered. If however, you feel you can get much better value by doing a little bit of heavy lifting yourself then they may not be suitable.

 

Flinders View

 

This thread is sad
Why do people fall for this rubbish
430k in a rubbish suburb for a house on a block half the size of the norm
Whats the median 300k?

Im going to move to sydney and spruik

You realise for 430k you could buy in a bayside suburb like birkdale that is closer to the city and already has very good demographics

Andres do your own research, cut all ties from thus mob, no matter what you think they have done for you, they are not your friend

 

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Biggest problem I see is that a very large chunk of people who buy IP's in Australia have a minimal understanding at best, of how to build wealth using real estate.

 

Thanks for the advice Hugh.

I think I will definitely spend some time comparing median house prices/land prices/building prices in the area to determine just how inflated these H&L packages really are

Given your last comment, the challenging thing to work out is how much that extra depreciation is worth relative to paying a higher purchase price initially. For example, if a new home will cost you 10% more than a 3 year old one, is that a better deal given the increased depreciation? There's also the fact that with the H&L packages you only pay stamp duty on the land, which also provides a significant financial benefit

 

Well it seems from my initial research and the overwhelming sentiment here that there is much better value to be had by doing your own research/heavy lifting. Seems H&L packages are over inflated compared to the market and novice investors (such as myself) are the prime targets as they generally have limited knowledge of the market and may also be time restrained.

I also question how much more rental yield a new property really attracts in comparison to a 3-5 year one, I think it may be negligible. I also think an older property on a larger block may attract the same or more rent as they have more space AND are a unique build, as opposed to all these H&L packages where the properties all look the same

 

Yeah well what can I say, I'm a novice investor hence why I posted here asking for advice/help.

Regarding the $430k property in Springdale Heights, don't forget it is a dual occupancy building so while the current median house price in the area is $265k, this one is essentially two properties in one, hence the rent appraisal at $580-$610 per week. Also worth noting that the median house price in Springdale Heights as gone from $200k to $265k in the last 12 months, that's pretty solid CG isn't it?

I do agree with your concerns regarding the land size though, they've got this one at 146sqm for the 3 bedroom component and 99sqm for the 2 bedroom, very small indeed.

Thanks for the advice regarding Birkdale, I do however like the pocket around Ipswich and the potential there for good CG so I think I'll stick there, but I may very well find I only need to spend $300k max to get something of very good value.

It's interesting seeing the overwhelming consensus here that I should cut ties with these guys, I think I might just tell them that I'm gonna locate my own property and the broker can just help handle the finances

 

Thant sounds like a reasonable conclusion to draw.

 

Would you mind expanding on this a little?

I've done a fair bit of reading lately both hear and elsewhere, is your main concern with the H&L packages the fact that with the inflated cost you are setting yourself back a few years before making any sort of CG gains which means you're not building equity quickly?

Keen to hear your thoughts

 

Thanks for your help Mick, much appreciated

 

All good mate. If you do invest in yourself and skill up in the required areas you will be much better served in the long run. I have come to really enjoy the property searches and weekends away annoying other agents for a change haha. I know Leo2413 is big on reading and so am I. He has posted a few lists in the past about must read books for property investors, they would be well worth your attention moving forward.

 

Nice spot!

 

Ok just my opinion here.

Mate I think you got it right with your conclusion. Personally I think H&L packages in general for short to medium terms at least, tend to have poorer CG. I know there are exceptions but I wouldn't want to make 'exceptions' the norm for buying ips.

Then when you add its in a location like Redbank that is 30.1km from the CBD and your looking for a price point of 450k, you can just come closer like 15km from the CBD and buy an established place which will likely have better CG simply because it is so much closer to the CBD. You might also be able to add value to it. This is touching on strategy and I know everyone is different.

But getting back to your post, yes my main concern is too much supply in that area, your paying a premium for the build, quite far from the cbd when there are closer suburbs for same amount (granted not new stock so might have more maintenance) but if I was a betting man I would move closer to the CBD, something I can add value to down the track too.

Also personally I think there is little value in getting a BA for this type of deal. Stock is plentiful, not much demand/competition therefore making it easier for you to just take your pick and negotiate. Now if time is the issue then I understand that completely and BAs have a place for sure. But if you have the time and are wanting to build a large portfolio eventually, then take the flight down and do it yourself.


Also I noticed you mentioned that the BA firm also does mortgage brokering, financial planning and property consulting. For me this is a huge red flag. Now it might be completely legit with no conflicting interests but personally I doubt it, so be very careful. If it were me, I would be looking for my own broker that some people highly recommend completely independent from the BA company. Same thing goes for all other services they offer. I know it might be completely legit, but there is that added risk of lack of tranaparency and conflict of interests. Personally I just think its completely unnecessary to take on this additional risk.


You have also mentioned that "we aren't looking for immediate short term gains from this IP, we will be holding on to it long-term (10-15 years)."

What about If you can get a better return/growth amount in a shorter period with acceptable risk then why not? Also If your looking to build a larger portfolio (I don't know if you are) then you will need growth asap in order to extract the equity to continue investing. Another reason why H&L packages may not be the best way to go.


If you still want to purchase out there then as others have said, established places in Goodna and surrounds may be a better option, though I would still be looking to come closer to the CBD with the budget you have, unless you are very cashflow sensitive.

I don't know your overall situation in any detail though, so in all honesty my comments really have limited use.


Good luck mate

 

They just sent me another one, a H&L package in Caboolture. $387k, 4 bedroom (190sqm) on a 430sqm block, rental appraisal $360-$380 p/w

Seems like a good spot, rental yield is 7%. Having a quick look at recently sold places, seems you can get something similar for around $300k-$350k at similar rent and on a much bigger block

 

Caboolture

Whats next a house and land package in Beaudesert?

 

Thanks so much Leo for taking the time to put together such a useful reply, I really appreciate it

It seems it's a fair conclusion to make that a H&L package limits your CG ability over the short-medium term, no need to beat that drum any further.

Totally understand your point regarding the price point and relative location, it all makes sense. Given this will be only our second IP, would you suggest reducing the price point to around $300k and buying around Goodna, etc, or utilise the full max amount of $450k and look at areas much closer to the CBD? Which strategy do you think would allow quicker generation of equity for another future purchase?

Regarding the BA and property group, I've got 3 young kids so I guess yeah initially the thought was to have someone that could help identify some good investment opportunities for us as I'm a little time poor at the moment. But the more I look into it I think I'm ok with doing my own research and even flying up there to have a look, I'm pretty confident I could find something of better value than what's been offered so far.

Regarding your comments about short-medium term growth, I think you're right and my comment about holding it long-term seems to be me repeating what the group presented to me in relation to the H&L packages, they showed me 10-15 year reports about how cash flow positive it would be and the gains to be made, I guess that was their way of justifying the option

We're definitely not cashflow sensitive at the moment so no issue spending up to the max $450k price

Thanks again, your input has been really helpful