March 2013 - Profitable Subdivisions
By Rich Harvey, Managing Director propertybuyer
Welcome to your March propertybuyer market update.
In this edition we will look at;
- Profitable Subdivisions
- Rent vs. Buy
- Client stories
- New Look Website
- Vote For Us & Win!
1. Profitable Subdivisions
There are several strategies to make money from property investment. However, each strategy comes with its own risks and rewards. Completing a subdivision is a smart way to create profit in a relatively short timeframe that can be used to purchase further property, or to recycle into another venture.
At propertybuyer, we have a developed a streamlined system of finding, evaluating and securing profitable subdivision sites for our valued clients. We identify suburbs and regions where completing a subdivision is worthwhile. Not all locations are equal. We look at the supply and demand situation. We examine whether there are any significant developments about to take place in the area that could affecting local market pricing. Once we have identified the right area, we then focus on finding suitable sites that would allow for a profitable property subdivision.
Finding suitable subdivision sites is difficult work. It requires countless hours of searching, calling agents, talking to council planners, engineering consultants, town planners, market research and negotiation. There are many traps for the unwary when it comes to subdivisions. Have you considered subsidence, run off, easements, covenants, sewerage, water and electricity access? Are you familiar with the local DCP (Development Control Plan) and other restrictions on land use? What are the section 94 developer contributions?
As you can see, completing a subdivision is not for the newbie investor. It is for investors that have some level of comfort with risk and are prepared to work with professional consultants to achieve the most profitable outcome.
To work with propertybuyer using the subdivision strategy you will need to meet the following criteria:
- Have at least $100k in available cash or equity
- Be pre-approved or have the ability to obtain finance pre-approval for a purchase price of at least $350,000
- Have invested in or purchased at least two properties
- Understand the nature of the risks of investing in a subdivision property
Key benefits of using propertybuyer:
- Stop wasting time searching and find sites pre-qualified for profitable subdivision
- No need to wait for capital growth - create instant equity!
- Receive independent and impartial advice
- Completely project managed by propertybuyer
- All costs and contract details of subdivision provided before committing to a purchase
- Obtain access to our hand-picked consultants and tradespeople
- No secret fees or kickbacks - full disclosure
- Work with a trusted team of professionals
- Fast track your property portfolio
What does the service cost?
We provide a fixed price service so there are no surprises. Our fixed fee is $15,000 (plus GST) and covers:
- Identification of suitable subdivision sites
- Assessment of profitability
- Project management of the subdivision process
- Access to a team of hand picked professional consultants to streamline the process
Call us on 1300 655 615 or email email@example.com to discuss this opportunity today.
2. Rent vs. Buy
The vexing question of whether to rent or buy has been around for decades and will continue to perplex would-be buyers of real estate. With interest rates now at historical lows, mortgage repayments may be lower than renting in many suburbs around Australia. RP Data has recently identified 388 suburbs where it is currently cheaper to buy than rent.
Money isn't the only factor contributing to a person's decision as whether to rent or buy. Buying a home can brings sense of security and stability. Paying off your own mortgage will always be more beneficial than paying off someone else's. It helps build your wealth position. As the property appreciates in value you build equity and are on track to having a secure financial future. Property ownership allows you the freedom do what you want with the property. Whether it be hanging a picture up or adding a swimming pool or redecorating the living room.
But perhaps you're not in a financial position to buy or you don't have a deposit to get into the market. Maybe your job will take you interstate or overseas. There are plenty of good reasons to rent too.
Let's look at some the key questions to guide your thinking.
What portion of people rent vs. buy?
- Australia wide - 30% rent vs. 35% with a mortgage vs. 32% who own their properties outright
- Sydney - 32% rent vs. 35% with a mortgage vs. 30% who own their properties outright
- Melbourne - 27% rent vs. 37% with a mortgage vs. 33% who own their properties outright
At what point is buying better than renting?
Buying would be considered the better option if the mortgage repayment is similar to the weekly rent payable. With falling interest rates and ever increasing rents, buying is looking to be the more appealing option.
This gap between rent and mortgage repayments is closing due to the reduced cost of borrowing. When a property is considered to be neutrally geared or better, then the option would be to buy as opposed to rent. Any person in the predicament should however take note that there is more to buying then just meeting repayments. Other costs such as the initial deposit, loan establishment fees, property maintenance, strata/council costs must all be factored in, only then can a true judgement be made as to whether it is more beneficial to buy rather than rent.
How "affordable" are property prices now compared to a decade ago?
Housing affordability is at its highest level since 2009. Housing now looks to now be more affordable compared to a decade ago. In 2003 the median house price in Sydney was $460,000. The median annual wage during that time was $42,811 meaning that the median house cost 10.7 times the median wage. By December 2012 the median house price had grown to $656,415, with the median wage $69,990, which would indicate that currently the median house costs 9.3 times the median wage.
What are the key advantages of renting?
- You don't have any maintenance worries (that's the landlords problem)
- You can live in a more "up-market" area where you may not be able to afford to buy
- You can move homes more frequently
- The weekly rent is usually much cheaper than mortgage repayments
- Buying and selling costs are expensive, but when you rent, you just have to pay removal fees not thousands in stamp duty and legal fees
What are the key advantages of buying?
- Stability - you are in control of whether you move or not. The psychological security of owning (paying off) your own home and achieving your "great Australian dream"
- Wealth building - by paying off a regular mortgage with both principal and interest, you are building equity and increasing your net worth. At the end of your working life, you will have nil equity from renting but stacks of equity from repaying a home loan! The home loan does have a finite life 15 to 25 years whereas you could keep renting forever
- Rents keep going up with inflation. Sometimes rental shortages mean it's hard to get into a certain area
- You are not subject to regular inspections, the threat of eviction or rental increases.
- You generally can't renovate a rental property, but you can renovate and redecorate your own home to your heart's desire
Renting can make a lot of financial sense if you decide to commit to a budget and then use your surplus income to invest in a property. That way you are "in the market" and benefiting from capital growth from your investment property - and you could consider the rent you are paying as the equivalent interest you would be paying on your own home.
Buying outright on the other hand gives you the benefits outlined above. There is no right or wrong answer here - it will depend on your individual circumstances and financial position. I encourage you to search the market and get independent advice that's right for your situation. If you are looking to buy my team of buyers agents would be delighted to help you find and negotiate the ideal property for your budget.
Rich Harvey is founder and Managing Director of www.propertybuyer.com.au, Australia's most awarded Buyers Advocates. Propertybuyer helps property investors and home buyers search and negotiate the right property at the right price, everytime. Visit www.propertybuyer.com.au or call 1300 655 615.
3. Client Stories
Here is a selection of feedback from some of our happy clients last month:
Buyer type: Homebuyer
Buyer's brief: Light & airy apartment in the right location
I wanted to buy a 2 bedroom apartment in/around Randwick that had an open kitchen, balcony, car space and good size living area. Before engaging propertybuyer I felt this was a big task to do by myself. I had been looking seriously for 4 months before engaging propertybuyer and had changed location a few times. I was concerned I would not be able to find a place in the location I wanted to suit my budget.
Anna Rorke from propertybuyer was an amazing agent. She gave me options such as slightly moving locations and slightly increasing my budget to put myself in a better position to get everything I wanted. She saved me a lot of time by viewing properties first and eliminating ones that would not be of interest. Afterwards I felt much more relaxed and at ease knowing that Anna was searching on my behalf. She knew exactly what I was looking for and wasn't going to let me settle for anything less. Engaging propertybuyer is 100% worth the money. It saved time and I was confident that Anna would help me find the right place and it is a lot less stressful having someone so knowledgeable about the whole process working with me.
"Engaging propertybuyer is 100% worth the money."
Buyers' Advocate, Anna Rorke
Nisha had been looking herself for some time and found it difficult to find the ideal property, in the area's she was looking that were in her budget. We went over the options of looking in adjoining suburbs which offered better value and also increasing her budget to be more realistic. As a home owner it is important to find something that meets your needs in terms of the use of space and light. It took a few months and I advised her not to purchase just for the sake of it and we did find the perfect home and managed to secure prior the auction.
3. New Look Website
We recently gave our website a new face lift. As well as receiving my monthly market updates, you can now subscribe to my weekly blog to get greater insights into all things about property.
The new website contains updated video testimonials, case studies, recent articles and there are several free reports you can download including:
- The Top 20 Investment Criteria
- SMSF Property Investment Strategies
- Top Ten Tips for Buying your Next Home
- Moving Checklist
See more at www.propertybuyer.com.au
4. Vote For Us & Win!
2013 Northern Beaches Local Business Awards.
Vote & win a Samsung Galaxy Camera
Nominate propertybuyer and you could win the 3G+ WIFI Camera! We thank you for all of your nominations.
Awards Area: Northern Beaches
Category: Specialised Business
Voting opens: Monday 1st April, 2013
Closing date: Friday 17th May, 2013