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Property Investment Articles

Monday, March 07, 2011

This article describes the eight strategy of nine property investment strategies.


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Strategy 8 – House and land packages

Pros 

Delayed settlement gives you time to get your finances in order and even buy more property than you could afford to in your current situation.

Stamp duty savings as you pay stamp duty on the land component only.
In a moving market, an investor can make a gain on the investment simply by holding it in the period between agreeing to purchase and when construction is complete.

Some investors use this opportunity to buy several ‘off the plan’ developments with a view to selling off some before settlement to pay for the remainder.

Cons

Units are subject to the possibility of oversupply in the period between agreeing to purchase and when construction is completed. (avoid this con by sticking to house and land packages, townhouses or unit developments with lower number of units)

You have no control over another 10 apartments blocks going up around yours.

Can become a nightmare if the developer goes into administration before the project is complete.  (avoid this con by ensuring the developer is fully insured).

Low valuations of the final development may lead to additional funds being necessary to complete.  (Avoid this con by obtaining professional advice as to your financial position if this occurred)

Solution

“The good news is that a lot of the cons can be extinguished by undertaking the due diligence and research. You need to ensure that the developer has a sound track record of choosing houses in the right location, choosing builders that have stable and profitable track records, and choosing house and land packages instead of units. Land is much more governed by the rules of demand and supply because it is scarce. The closer to a CBD the scarcer it is.”

You also need a really good mortgage broker. House and land contracts and the process itself is fraught with complications and technicalities. You need a broker who is experienced in financing for such developments. See later – how to select a mortgage broker.

Download the full report at www.wfscanberra.com.au
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