Many properties offered by property marketers are sold ‘off the plan’ often well before the development even starts. In fact many lenders will require a percentage of pre-sales before lending to the developer as this lowers their risk.
When buying ‘off the plan’ you are signing up to buy something, sight unseen at completion. The risks are many. When you signed, it is a biding contract. In other words you can’t change your mind about buying later. Settlement is often a year or more in the future, and the start can often be delayed until enough pre-sales are obtained. Markets change as do interest rates. What was affordable when you signed may be otherwise when it comes time to settle. There have been many instances of this where people who bought with a view to on-selling have been caught when the chance of a quick resale evaporated and tenants failed to materialise.
In a rising market where there is demand for the property, buying ‘off the plan’ may bring a windfall to those who resell at or shortly after settlement. The late entrants however can be caught having to settle a property perhaps years after they signed to buy it, and when new buyers and money have dried up. That is particularly galling if at the same time the developer is letting his unsold units go at reduced prices.
This is very much a case of buyer beware. No one should enter a contract to buy unless they are sure that if the worst happens, they can still afford to settle the deal.
POSTED: 20-Jul-2009
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Who hasn’t been interrupted during dinner by someone calling to invite you to a seminar to ‘show you how you can save tax’ or ‘provide information on investing’ which is reality a dressed up property sales seminar.
Many property developers, particularly those with large developments will use a marketing company to sell the properties, more often than not through these seminars. These marketers are generally not real estate agents. They are contracted to sell the properties and their fee/commission is built in to the price of each property. They are largely unregulated and they do not have to disclose these costs to you. This can mean that a property is most likely selling for a lot more than its actual value.
With new developments it difficult to know whether the property is well priced. After all, each property is somewhat unique. One thing is for sure, the more the marketing hype, the more the advertising and glossy brochures, the greater is the cost to the purchaser.
As the true value is less than the purchase price, it will therefore take some time before the property rises by enough for the investor to make any money.
POSTED: 20-Jul-2009
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If you insist on buying an investment property (see Forum article), then at least try and be smart about it. Don’t buy because the development has glossy brochures, or it’s near home so you can ‘keep an eye on it’ or because it’s in a good area and one day you can redevelop the site (you won’t). Buy it because it’s a good deal!
The money to be made in property is in the purchasing not the selling. A property you pay too much for will never make the difference up no matter how long you hold it. If you want to buy, look for a property that has all the attributes, near shops, transport etc, and is selling for less. They are out there you just have to hunt for them.
In other words, you need to do your research to buy the property at a discount to market. This takes time and patience. Discounted properties are always available, you just have to look for them. One golden rule is don’t follow the mob because the mob will invariably be paying too much. As Warren Buffet says “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
POSTED: 20-Jul-2009
Posted in Property Investing | 1 Comment »
It has been reported that the Australian Treasurer and New Zealand Finance Minister have reached agreement on an arrangement that will allow the transfer of retirement savings accounts between the two countries.
As yet this is at the Memorandum of Understanding stage, but it should not be too long before a set of rules is drawn up and legislation passed, which will allow Kiwisaver funds to be transferred to certain Australian superannuation funds and vice versa.
Australia currently has some $13 Billion in so called ‘lost’ accounts. No doubt there are significant amounts belonging to New Zealanders who have returned home, which after implementation of the arrangement should be able to be returned to its owners.
POSTED: 20-Jul-2009
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