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MWDB so your investments must've done better than most who bought in estates in Sydney.....
I think he can't come up with the stamp duty funds immediately and he wants something he wont have to put too much money in for a while. E.g off the plan.
Not too sure if your friend realize he doesn't have the free stamp duty if he's buying it as an investment even brand new, I think no stamp duty rule only apply to owner occupier.
if he does it he will have a hard time explaining to ATO why did he claim FHOG when he work in NSW and claim to be living in QLD?
Just don't take the strategy here straight there if you're buying new I guess due to the fact that there is a lot of land and a lot of estates and not enough population growth to make it go crazy like in Sydney..
My friend ended up buying in Yarrabilba. 3 bedroom house for 307k renting at $380/week so the yield is there I guess. He says it's a 15-20 yr hold though
New means your paying a premium and someone smarter than you made the money.
New doesn't allow you to buy under market value.
New doesn't allow scope for adding value.
New often means buying in areas of massive supply.
All those factors are killers of CG and generally make for poor investments, at least in the short to medium term and can greatly slow wealth creation.
Leo
If new is sold at a premium why are all the new properties we are buying for clients positively geared after tax with 100% debt?.
If new is sold at a premium why are all the new properties we are buying for clients positively geared after tax with 100% debt?
HI Mark, Its not a matter of IF they are sold at a premium, most of the time they are as a matter of fact, especially if bought from a developer. Compared to other options for IP investments, buying new most of the time is a poorer and lazier choice, especially for the investors who want to accelerate their wealth creation. Perhaps your clients are more interested in buy and forget for 25 years.
Why are all the House & Land's that we are buying for clients valuing up by over 6% at completion? that's 6% capital growth over the Land + Build contract price? BTW I'm basing this on 50+ House & Land's we have finished for clients so far this year.
I'm sure this is very possible I'm not doubting it. However, its also very possible that by buying older stock, something investors can buy BMV and add some value to, they would be increasing the value by more than 6% when they are done with it 15%? very possible. Also, i'm not sure but if the dwellings are units in massive complexes with pools, gyms etc then I can add another 20 no no's to it (but you didn't say that's the case so I don't know).
6% capital growth is equal to a 30% return on investment based on a 20% deposit.
What about 2, 10% deposits leveraging into double the asset value, both buying BMV and adding value I think it would trump a 20% deposit on half the asset value with no room to add value. In my opinion if your clients are looking for buy and forget for a long time then it could be a fine option. But in my opinion its far from the best.
Massive Supply really? clients aren't stupid. Who would buy anything in an area with "massive supply"? That's just plain pointless.
Originally Posted by Mark Coburn View Post
If new is sold at a premium why are all the new properties we are buying for clients positively geared after tax with 100% debt?
HI Mark, Its not a matter of IF they are sold at a premium, most of the time they are as a matter of fact, especially if bought from a developer. If we did what most people do then we would get the results that most people get and we don't get average results Compared to other options for IP investments, buying new most of the time is a poorer and lazier choice, especially for the investors who want to accelerate their wealth creation.With it taking us around two years of due diligence to select an area to starting buying in I would say there is nothing lazy about it. Buying new requires an extraordinary amount of data to be collected and research to be done. Something most one man bands have no chance of achieving. We started buying in North Lakes 2 1/2 years ago when we stopped buying in Sydney. The contract price on a house and land was around $400k then and around $485-490k now. Perhaps your clients are more interested in buy and forget for 25 years. Yes, you are right buy and hold. Avoid trading costs and risks. Forget? no way. Revalue and take the equity to go again
Why are all the House & Land's that we are buying for clients valuing up by over 6% at completion? that's 6% capital growth over the Land + Build contract price? BTW I'm basing this on 50+ House & Land's we have finished for clients so far this year.
I'm sure this is very possible I'm not doubting it. However, its also very possible that by buying older stock, something investors can buy BMV and add some value to, they would be increasing the value by more than 6% when they are done with it 15%? very possible. Also, i'm not sure but if the dwellings are units in massive complexes with pools, gyms etc then I can add another 20 no no's to it (but you didn't say that's the case so I don't know).So why do you think I'm a lair?
6% capital growth is equal to a 30% return on investment based on a 20% deposit.
What about 2, 10% deposits leveraging into double the asset value, both buying BMV and adding value I think it would trump a 20% deposit on half the asset value with no room to add value. In my opinion if your clients are looking for buy and forget for a long time then it could be a fine option. But in my opinion its far from the best. There is no way I would recommend that a client uses more than 80% loan to value ratio borrowing as a strategy. It's just too risky for an inexperienced investor to manage debt with that level of risk. In my option LMI should be for 1st Home Buyer only.
Massive Supply really? clients aren't stupid. Who would buy anything in an area with "massive supply"? That's just plain pointless.
This happens every day of the year. Clients buy in places with massive supply. If we did what everybody does, we would get what everybody has got. My clients come to me for knowledge and direction. I'm not interested in following the herd when we know how to lead it
This is all just 1 man's opinion mate.
Leo
HI Mark,
No mate, I never called you a liar at all. Just a typing/communication misinterpretation. Apologies if you felt I was saying that.
With reference to some comments you made: "There is no way I would recommend that a client uses more than 80% loan to value ratio borrowing as a strategy. It's just too risky for an inexperienced investor to manage debt with that level of risk. In my option LMI should be for 1st Home Buyer only."
I know many people on average incomes who have used much less than 20% for a deposit, and this did not increase their level of risk dramatically. It also allowed them to get into the market and build wealth much faster. To say I strongly disagree with you that LMI should be for 1st Home Buyer only is an understatement of the century. LMI is so misunderstood by the vast majority of first time investors. Many first time investors have good employment cashflow, some have decent amount of equity/deposit and for any company to only steer them towards a 20% deposit as any less is too risky, is in my opinion a great disservice to them.
I appreciate your offer to meet up and discuss, but it would be a waste of your time. I understand your approach now and its not something I can be swayed on. Again, this is all my opinion. Others may completely agree with your sentiments.
Cheer
leo
It is horses for courses and understanding the client, their risk profile and end goal.
Never the less high debt does increase risk and I'm all for reducing risk as a principal. Any level of debt carries some risk and I've seen too many financial train wrecks to be complacent about high debt levels.