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Posts Tagged ‘investment property’

After stringent saving and planning, the sale of a business venture, or perhaps a lucky inheritance, you may find yourself with a significant amount of money to do what you please with. This article will consider 4 of the options in front of you if you wake up tomorrow with $200,000 ready to spend, invest, or hide under your mattress.

1.       Invest in Property

Whilst this is not the most exciting of options it is potentially the wisest by far. With a $200,000 pot of money it would be possible to gain access to a loan between $450,000 and $500,000 with ease. With this amount of money and some sensible research you would potentially be able to buy two investment properties and still have a proportion of your fund to place into a savings account should you need help with the mortgage repayments later on. Read the rest of this entry »

The big new buzz in the property market is “the service component”. This major new move is based on technology and market demand for speed and efficiency. Read the rest of this entry »

Buying investment property can be tricky enough in good times. Buying during a downturn can be a mixed blessing, too, but there are positive elements in this type of market that need to be understood. Readers should note that this is very much a real “due diligence” exercise, and you must have your facts straight about any intended purchase in this type of market. Don’t guess about anything, get your numbers right.

Values and risk management in a falling property market

A falling market can be a great opportunity- If the property purchase has proven intrinsic upside values.

These values can be:

• Unrealized development potential
• Undervalued property or land assets
• Commercial options
• Subdivision or consolidation of title
• Future location value based on projected developments

This may seem a bit too good to be true, when you see the upside value. You may also wonder why the vendor isn’t aware of that upside. As a matter of fact, they often are, but have their own reasons for selling. In some cases, vendors sell to make a loss against other consolidated profits. A falling market can be a blessing to some investors in this regard, creating a built in offset against capital gains. In other cases, they simply don’t have the capital to hold the property. The falling market creates financial pressures on vendors in different ways.

Then there’s the risk factor, which is very easily defined- Buying a lemon in a falling market. This equates to losses up on losses, and it’s a situation to avoid at all costs. This is also where “due diligence” comes in with a vengeance.

The investment property must:

• Be liability-free, with no built-in added costs on the premises or land. These costs can kill an investment and turn it into a black hole.

• Have no expensive title issues. (This is a case where you do look a gift horse in the mouth, and get a professional opinion of the horse’s dental hygiene on principle.)

• Be what it appears to be in terms of investment values. You may need to do some research, but it will be worth it. Check everything and double check it with an independent valuer if necessary.

The falling market environment

Falling markets are typical killers for property investment. Wondering how far a market will fall is pretty futile. The fact is that the falling market has to be factored in to the investment strategy before you even purchase.

For example:

The property market has fallen by 5%. You factor in another 10% as a scenario, and instead of filling your books with a semi-fictional investment property value, you make a conservative valuation for accounting purposes. This gives you actual accounting figures for your property portfolio, not guesswork, as well as reflecting the commercial realities.

The good news about buying in a falling market

Markets don’t fall forever. Resistance to price drops is very strong, simply because people don’t want to lose money. You can defray the drop in value with rental income or other commercial options so your cashflow is minimally affected.

You can make money in a falling market. Just remember to do your homework and make sure you’ve got all bases covered.

When things go really wrong with property investment off the plan, they tend to go very wrong. By looking at some of the typical disasters that arise when something does go wrong, we can make the right decisions at the right time with this type of investment property.

We have all heard of horror and windfall stories related to investment property off the plan. Which of the properties go south and why, can often be very hard to predict and understand, particularly in the case of those who listen to too much hype and marketing, or those who do not understand the dangers. There are some critical factors that cause the same problems to arise with investment property off the plan. This article looks at the common problems and why they occur.

• Discount for Uncertainty. When you are buying off the plan, you are buying a promise or an agreement. It is important to understand that agreement and make sure you have recourse if anything is not the case. The details and conditions of your contract must be checked by someone who has experience. There have been a number of cases where the finishing’s of an apartment complex have not met the expectations of the buyers. You are also risking lending your deposit for a given period of time in the case where the building is not finished, or waiting longer instead of terminating the agreement if the developer does not meet the completion time.
• Risk with Financing. Property off the plan is really suited to people who have their own money to make a settlement, or other options they can fund themselves. If you are buying off the plan with finance, there can be considerable time between when you make the deposit and when you actually need the finance to pay the settlement. It does not take long for sudden changes to change the confidence in the banks, and finding yourself without the ability to make the settlement means you will lose your deposit.
• Flipping. Flipping off the plan investment property has always been very popular. It was so popular that it was getting out of control. This is the case in just about every market. It has been a number of years since the introduction of laws that have put control and constraint on the time frame between purchase and sale. There are still those who find creative ways to get around this. When the complex comes to completion, there will be those who even risk selling their apartment without getting the finance to buy it. This can mean a huge drop in the current price on the market if a lot of people are trying to do that. We can never tell how many other apartment owners have this intention. Essentially they are gambling with their deposit, and it will influence the value of our property, and if we are getting finance, a drop in value can influence our finance, which might be higher than the market value at time of settlement.
• Total Number in Whole Market. It is very important to look well beyond a single complex or development when you are buying off the plan. If there are a huge number of other projects completing at the same time as your, even far away in another city and state, the values across the market will be greatly influenced at that time. You should know exactly how many other off the plan projects are underway, or will be soon underway, and how long until they all reach completion, when you are considering purchase.

With good research, good advice, and all the information on the whole market, off the plan investment property can be very beneficial, if made at the right time. Sometimes, we just have to wait a few years until the market is right.