What is your thoughts on Co-investing/Armchair development?

Discussion in 'Investment Strategy' started by Propertyislife, 11th Feb, 2019.

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Is this a good investment?

  1. Yes

    0 vote(s)
    0.0%
  2. No

    4 vote(s)
    40.0%
  3. Need more information

    6 vote(s)
    60.0%
  1. Propertyislife

    Propertyislife Member

    Joined:
    4th Feb, 2019
    Posts:
    10
    Location:
    Melbourne, Victoria
    Hi PCers!

    What are your thoughts on investing in property development funds?

    Here are the details:

    - Minimum investment of $10,000.00
    - Secured returns of 12% p.a. (net of all fees)
    - Diversified investment portfolio
    - 2nd mortgage security
    - Investment duration up to 24 months
    - ASIC Registered
    - Redeemable preference shares
    - Investors returns paid first before the developer

    Please share your thoughts,

    Thanks,

    Greatly appreciate.

    Jack
     
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    1,691
    Location:
    Australia
    If you are thinking about it because you dont hav enough for a deposit but want to do something involving property.....
     
  3. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    1,691
    Location:
    Australia
    Good is subjective. You have 5 mil in net and want to jump returns on the cash part of your portfolio, and have a strategy to get out well before it hits the fan? Maybe.

    But you have no control and a second secured mortgage means nothing. The preference share, length of investment, none of those are guaranteed. Everything depends on how good the developer is and what the market does. You are taking on the part the banks dont want and the developer cant find funding for at 12%. Think about that. The bank thinks its too risky or want higher returns, and the equity provider want a cut of the profits, not a capped return.

    If you have 50k and think this is a cheap way to get into property without thinking about the cycle? Bad.

    You putting cents on that minimum amount is a big flashing sign.
     
    Last edited: 11th Feb, 2019
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  4. Car tart

    Car tart Well-Known Member

    Joined:
    16th Sep, 2018
    Posts:
    288
    Location:
    Sydney-Melbourne
    Run!
    (Away)
     
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  5. willair

    willair Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    3,713
    Location:
    ..Brisbane..
    Do you understand how the 2nd mortgage security works?..The solicitors would make more when it goes belly -up..
     
    Last edited: 11th Feb, 2019
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  6. VB King

    VB King Well-Known Member

    Joined:
    8th Jul, 2015
    Posts:
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    Location:
    East Gosford
    Totally correct.
    You have to ask yourself why / how 12% is on offer when there is cheaper finance available. Red flag.
     
    willair likes this.
  7. Blacky

    Blacky Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    2,026
    Location:
    Bali
    I’m pretty sure someone else on here went with ‘armchair development’. It took years, was way over budget, and wasn’t worth nearly what it was marketed as.

    Do a search for ‘armchair development’ you may find a lot of answers.

    Blacky
     
    willair likes this.