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new estates

Discussion in 'Real Estate' started by talbashan, 2nd Apr, 2006.

  1. talbashan

    talbashan Well-Known Member

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    quick question:
    i'm about to invest in a mirvac estate but am getting a lot of criticism from 'experts' about these type of develpments. the main one being that when investing money in these new developments, a big premium is paid to the builder/developer and it is much wiser to buy an older/established home.
    what are your thoughts on the matter?
     
  2. Simon

    Simon Well-Known Member

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    Location:
    Newcastle
    Who cares who gets what?

    What is the end value and what is the market like on completion.

    If you make money then do it.

    Will it be more or less than an older home that possibly appeals to a different buyer?

    Some people pay a premium for new. I know plenty of philistines in my area would rather live in a new home on the outskirts of town than in a fashionable, older inner city area.

    Cheers,
     
  3. talbashan

    talbashan Well-Known Member

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    simon,
    thanks for the reply. you're right, who cares who gets what as long as i make money out of it.
    i guess its just the parting with $500k makes me ask silly questions but i have to in order to put my mind (and critics) at ease
    tal
     
  4. Jacque

    Jacque Team InvestEd

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    Don't ever think these questions are silly or trivial, Tal. Fastest way to learn by asking, in my opinion :)

    As Simon's stated, forget about who gets what out of the deal. That's irrelevant. The more important questions are:

    Does this type of property purchase fit in with your long term (or short term) investment plans?

    Is it in an area likely to have consistent future capital growth? (Has the area peformed well historically and does the individual property meet the fundamentals of a good IP?)

    Is it a good buy? How do you know? (Have you done your research on surrounding properties, both new and old, that have sold recently?)

    Is it in a high demand area for rentals? (without being surrounded by too many rentals that are exactly the same as yours).

    Have you had realistic rental appraisals done?

    What's the net yield after ALL costs (include strata fees if applicable, rates, PM fees, interest payments) and can you still afford to buy it?
    What's going to be your pre-tax costs?

    If, after answering these questions you're still happy to purchase then it's your decision. It's your investment and your choice.

    There's always going to be different schools of thought when it comes to investing in residential property. Some prefer the lower maintenance issues of newer properties (and initially higher depreciation benefits) whilst others will see value in adding through renovating to established properties, or feel that the larger land lot is what's driving the growth in the long term.
    In the end, however, all you can do is your correct due diligence and invest in what is right for you.

    Incidentally, where are you looking at buying (if you don't mind me asking!)?
     
  5. Simon

    Simon Well-Known Member

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    I never meant to imply your question was silly.
     
  6. talbashan

    talbashan Well-Known Member

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    jacque,
    thanks for your reply too. i've done as much due diligence as i can + going up to brisbane again next week for another drive through. residex reports are useful but limited and the data lacks description of the properties sold.
    i guess that in part i am going on the recommendation of roger/navra so there is an element of trust here, in other words, if it was up to me, i probably would not have looked in those areas and development style estates to start with. this is a new concept to me. being from sydney, buying new is almost unheard of within rental reality.
    the place i'm looking at is at wakerley.

    simon,
    i never thought that you implied that my question was silly, its just that when one lacks confidence the questions are quite basic. when an answer comes along you can't help but think that it was a bit silly. anyhow, its all part of learning i guess.

    thanks for your help guys
     
  7. D&K

    D&K Well-Known Member

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    Tal,

    If you don't want the hassles of looking after older properties but want better depreciation and a new property that tenants would prefer (hence maybe better yield) with good access to Brisbane, beach, road and rail, it looks like a good choice of location at first glance. You're closer to all these than the Western expansion corridor; that's got to be good long term. Can't comment on the individual house of course, but that's your DD.

    Wynnum-Manly area dropped 10+% about 12-18 months ago and has probably come back 5% since. Wakerly will probably follow to some extent. These would be reflected in the Residex median prices and would have turned up in your due diligence. There are still areas in Brisbane that are loosing value while others are holding; this is probably a good choice for future growth, maybe even in the near term.

    There are many sub-markets in the property market, even the Brisbane/SEQ market. If this had been in a less desirable location on the outskirts in another direction from the CBD, those "experts" might possibly be right. Never assume expert commentary, particularly if applying to the entire market or SEQ region, as being better than your individual DD on a particulary house or area within a suburb.

    All the best with the purchase, Dave
     
  8. Rickson

    Rickson Well-Known Member

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    I noticed the other day that Sunland offer a discount of 3%, from memory, to shareholders who buy new product direct from the developer. I checked to see whether Mirvac do as well, and I did not find this offer on their website.

    As investors, this is something we should encourage and utilise where possible.
     
  9. talbashan

    talbashan Well-Known Member

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    D&K,
    from my research, wakerley is expected to grow 4-6%pa over the next 5 years (a couple more over the next 8yrs). i'd say that although 15km out of the CBD, the fact that water is nearby is a redeeming feature and may help with those growth figures. i think there was a boom in growth % 3yrs ago with the start of the developments and that has slowed down now with the finishing of most. from here out, growth will be driven by the regions desireability rathar than another development stage of the estate coming onto the market (an artificial growth in my opinion- although growth is growth..)
    cheers
    tal
     
  10. TryHard

    TryHard Well-Known Member

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    Hi Tal

    I'm not too up on the area (I did live up the road at Cannon Hill for a while, tho'), or the estate approach, but I don't think that sounds severely overpriced considering what developers are trying to sell similar properties for in areas way out West much (much) further from CBD (I recently went looking on behalf of a mate).

    If your research stacks up and the gut feel is right (like you say, nothing much will fall within Rental Reality), Wakerley is in a corridor that will only keep getting filled up till there is no space at all between the CBD and the water, which can only be good for capital gain you'd think.

    Interested to know how you go - good luck :)

    Cheers
    Carl
     
  11. Tzaki

    Tzaki Well-Known Member

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    20th Sep, 2005
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    Location:
    Canberra
    Tal,

    The only stupid question is the onethat you DON'T ask!! :D

    Sounds like you DD is panning out, I have a townhouse in Wynnum West an am confident of the future growth, past growth has been above average.
     
  12. talbashan

    talbashan Well-Known Member

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    hi guys,
    again, thanks for the encouraging words. i'll let you know how it all goes re rent, problems, inspections etc.
    cheers
    tal