{"id":6141,"date":"2015-10-25T01:00:40","date_gmt":"2015-10-24T14:00:40","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=6141"},"modified":"2015-10-25T01:00:40","modified_gmt":"2015-10-24T14:00:40","slug":"smart-investors-strategies","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/smart-investors-strategies\/","title":{"rendered":"Smart investors' strategies – Shannon Davis"},"content":{"rendered":"

 
\nSmart investors know that if it looks too good it probably is. That could be the case with off the plan purchasers but if you are going to buy off the plan, in today’s show Shannon Davis<\/strong>,\u00a0from Metropole Property Strategists, explains how best to do that.
\n <\/p>\n

Transcript:<\/h4>\n

Kevin<\/b>:\u00a0 I was on a plane recently and overheard a conversation. Someone was talking about how they had made a lot of money out of real estate, and the way they had done is that they specialized in buying properties off the plan \u2013 this is before they were even constructed or even started construction \u2013 and because the developers had to pre-sell a number of the apartment blocks, they were quite prepared to discount the first few just to get some numbers up so that the banks would feel good about it. He was getting an automatic discount at the front, and he would then on-sell them several years later, given the fact that the market would move forward.
\nThat may have been okay a couple of years ago. I wonder what that strategy is like today. It\u2019s a conversation I want to have with Shannon Davis from Metropole Property Strategists, who looks after the Queensland side of the business.
\nShannon, thanks for your time.
\nShannon<\/b>:\u00a0 No worries, Kevin.
\nKevin<\/b>:\u00a0 Not a bad strategy, maybe 15, 20 years ago, or even 10 years ago, but does it work today?
\nShannon<\/b>:\u00a0 Well, if you get to put a small deposit down and the market does its thing in the meantime, and you settle two years later in a rising market, then sure, that\u2019s a great strategy.
\nWhat we\u2019re seeing more recently, though, is that maybe the concentration, the size of the developments have been a little bit bigger, and sometimes the developer can actually be your competition. If people put down a small deposit, their circumstances change, and the developer is selling off stock at the same time as maybe they want to sell off \u2013 shortly after completion \u2013 therefore, that discounting actually is a bad thing for the investor.
\nKevin<\/b>:\u00a0 Yes, it pulls it back down. That strategy I talked about at the start is okay if \u2013 as you said \u2013 you get in on a low deposit and you can actually achieve a discounted price, and then assuming that the developers sell all the stock on completion, you may be able to turn it over. But as you said, you could be in competition with the developer.
\nShannon<\/b>:\u00a0 Yes, that\u2019s right \u2013 and any other investors who have had a change of circumstances. And especially if it hasn\u2019t gone the right way, no one wants to settle on a property that\u2019s worth less than what they were wanting to buy it for. I think this is news right now for people in Brisbane, Perth, and Melbourne because we\u2019re starting to see in the CBD areas a bit of an oversupply in those capital cities.
\nKevin<\/b>:\u00a0 If someone wanted to buy off the plan, what should they be doing, what sort of due diligence, Shannon?
\nShannon<\/b>:\u00a0 I think floorplans are really essential. Some of them are just too poky \u2013 say, under 70 square meters for a two-bedroom unit or under 50 square meters for a one-bedroom unit. But you need to remember you\u2019re paying the full cost of construction, your land ratio in that investment isn\u2019t that much, and you\u2019re predominantly with a lot of investors rather than owner-occupiers.
\nMy recommendation is to probably look for something nearby, something that\u2019s comparable but is existing, and you\u2019ll probably find a lot better value.
\nKevin<\/b>:\u00a0 What sort of pressure is this going to put on developers? As I said at the outset, in many cases, they have to get a certain number of sales up before the bank will even fund the project. Therefore, there has to be a bank of people who will invest in these properties.
\nShannon<\/b>:\u00a0 Yes, definitely. They\u2019re mainly looking for the tax deduction of buying new. Maybe there\u2019s the First-Home Owners Grant with it, as well. But I think buying for tax deductions, rebates or incentives like that is a poor reason for investment.
\nDevelopers won\u2019t want you compare to the existing market \u2013 they\u2019ll say that it\u2019s different because \u201cIt\u2019s in this precinct and we have this rooftop pool,\u201d and everything like this \u2013 but if you compare a two-bedroom unit that\u2019s new and off the plan to what\u2019s in the same suburbs that\u2019s existing, sometimes there is a big disparity in price, and that\u2019s something buyers need to be aware of.
\nKevin<\/b>:\u00a0 What you\u2019re saying \u2013 bottom line here \u2013 is that you don\u2019t like off the plan purchases; you\u2019d much rather look for something more established, close by.
\nShannon<\/b>:\u00a0 Yes. It\u2019s better land ratio in the investment \u2013 over time, you don\u2019t pay for the cost of construction; the land rises \u2013 and often they\u2019re more generous in scope, size, and visitor parking, and you can add value. There\u2019s very little value you can add to a brand-new off-the-plan apartment.
\nKevin<\/b>:\u00a0 I read some statistics just the other day \u2013 just in closing \u2013 too, that quite staggered me about the number of people who are now investing in properties both for investment and also to live in.
\nI think the figures were something like 25% of all properties in Melbourne are now units, over 30% of all properties in Sydney are now units, but in Brisbane, we seem to be lagging behind in that market because only about 8% of all the properties in Brisbane are units.
\nDoes that mean that we\u2019re going to be seeing more units come into that market if we\u2019re going to follow those trends, Shannon?
\nShannon<\/b>:\u00a0 Yes definitely. The new town plan keeps Brisbane mainly as a low-density cap city, but there are lots of areas of higher density around transport modes and shopping precincts. Where those areas are, there are going to be a lot more balconies rather than backyards. It\u2019s just going to be something that Queenslanders and Brisbanites will have to get used to.
\nKevin<\/b>:\u00a0 Always good talking to you, Shannon. Thank you very much for that insight. Shannon Davis from Metropole Property Strategists in Brisbane.
\nThanks for your time, Shannon.
\nShannon<\/b>:\u00a0 No worries, Kevin. Thank you.<\/p>\n","protected":false},"excerpt":{"rendered":"

  Smart investors know that if it looks too good it probably is. That could be the case with off the plan purchasers but if you are going to buy off the plan, in today’s show Shannon Davis,\u00a0from Metropole Property Strategists, explains how best to…<\/p>\n","protected":false},"author":176692471,"featured_media":6144,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,13,25],"tags":[101],"class_list":["post-6141","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-latest-story","category-sponsored-channels","tag-podcast"],"yoast_head":"\nSmart investors' strategies - Shannon Davis - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/smart-investors-strategies\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Smart investors' strategies - Shannon Davis - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  Smart investors know that if it looks too good it probably is. 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