There are moments in life where a split-second decision changes the course of your future. It was a concept made famous in the 1990s Gwyneth Paltrow film, where a missed train trip resulted in extraordinary ramifications for her character.
Beyond Hollywood make believe, I’ve witnessed a real-life sliding door moment that saved an investor friend from a dire financial circumstance and, in the end, added tens of thousands of dollars to their personal wealth.
It’s a moral tale well worth your time.
The instant it changed
For regular blog readers, you may recall two-year ago (August 2019) when I wrote about my friend who was keen to invest in a new-build property.
August 2019 PART 1 of this story https://www.aspirenetwork.com.au/when-new-builds-go-bad/
In 2017, the investor attended an ‘investment seminar’ and found herself signed up to buy an off-the-plan, three-bedroom townhouse in a Melbourne suburb near her home. She was told the construction would be completed by Christmas 2018 and would deliver excellent capital gains.
She was confident in her decision to sign up and was all set to proceed… but then decided to let me look over the property first during her cooling off.
This was her crucial sliding-door moment.
I checked over the plans, specs, location and comparable sales evidence, and while things might’ve looked good on the surface, my experienced eye picked up a raft of red flags.
For starters, the construction and design was entirely subpar with a cooker-cutter layout that was identical to hundreds of other townhouses in the same locality. The fit out quality was poor too, and the builder wasn’t local and didn’t have a track record of construction excellence.
The townhouse also fronted a very busy road and there was no double glazing. It would be a nightmare to live in.
But that wasn’t the worst of it.
The off-the-plan contract terms were entirely in the builder’s favour. For example, once the build had reached its ‘compliance’ stage, the buyer was obligated to settle – even if there was a dispute about completion! The full amount was due regardless of a warrantee on workmanship, or arguments about what was or wasn’t finished.
It was also an easy $100,000 above market on both build cost and end value, and inflated commissions were being paid to the marketeer agent.
Because Mary came to me, we were able to get her deposit refunded and contract cancelled.
We then helped her find another more suitable investment option.
The 2020 update
So, what’s happened since?
Well, a visit to the original site has confirmed my worst fears.
The project is STILL unfinished. Those buyers were told it would be completed by December 2018. Here we now sit in March 2021 – and the project remains severely incomplete.
In fact, I think it’s still another 12 months away from being finished given the rate of construction at present – and that’s IF the builder doesn’t go broke first.
The photos tell the story:
Imagine that. You put a hefty deposit down on a project, buying into the sales presentation – and then over three years later, your money has been tied up in a deal that’s going nowhere. That’s three years of capital gains and rental income out the door – and a very real risk you’ll still have to pay the balance at some future date.
Fortunately, this didn’t happen to her, however I feel deeply sorry for all the people who did buys these!
We helped her purchase an off-the-plan three-bedroom, two-bathroom standalone terrace home on the Sunshine Coast for $430,000. The build was completed in October 2019 and immediately rented out.
Our investor who worked with us has now achieved 5-6% rental return since 2019 and over 15% capital growth at about $50,000 in capital growth.
Since then, the property has earned a gross rental yield of over five per cent with virtually zero per cent vacancy and currently rented at $495 per week (6% Gross Yield currently) and valued conservatively at $480,000+ in the current property market.
In addition, the Sunshine Coast market has gone through a period of excellent growth. At a minimum, the investor has enjoyed between seven and ten per cent capital gains… and all indications are values will continue to rise in the future.
Moral of the story
The moral of this tale is simple – you must work with qualified and accredited advisors when making important decisions around property investment.
You do not want to get advice from the agent selling you the property. This is riddled with self-interest on their part. They will tell you whatever they think you need to hear to tick the boxes and get the deal over the line.
An independent advisor who understands the process of investing along with asset and location analysis is essential. They can ensure you buy the right investment property, not be sold a dud.
Time in the market is too valuable to make bad decisions without expert guidance.
Always review any property location research and investment analysis data, with a professional, QPIA (PIPA Member) qualified & accredited ASPIRE Property Advisor Network Advisor. Never rely on glossy sales brochures or property marketing information, ensuring a property is right for your strategy. Property Investing is about BUYING a property that matches your goals, never be SOLD an investment.
Visit www.aspirenetwork.com.au or call our office to be connected with a Property Investment Advisor on 1300 710 933.