Legal and general Property Investments

Has anyone got any comments on these people , good or bad? They are advertising properties just outside Berwick on one of the new estates. They claim that they ensure tenants for 3 years and that you can get started in IP for as little as $1000 paying only 1/5th of the total mortgage payments.

Usually if something sounds to good to be true, it usually is? Where's the catch? Because I assume they won't tell me?

We're after our first IP, both work long hours and have little time to search for "bargins" and probably wouldn't know one if we saw it!!

Are these people worth talking to? I realise we won't make a huge amount, our main concern to get started is not to buy "a lemon"!!

One thing that confuses me is that they also claim that you can do this without it costing you anything, (not that I believe that) but that's "positively geared, isn't it? I thought that if a property had to be "negatively geared" for you to get the tax rebates!!

You can tell I'm new to this, but you guys are so great that I'm sure You have some advice for a complete starter like me!!
Hi Cazi,
cant comment about this particular company personally but I will tell you how you get tax rebates on cash flow + and neutral IP's.

Its called Depreciation

A building can be depreciated over an amount of time, not sure of the time 30, 40 year? (someone here will know). The % per year is then deducted from your taxable income giving you a nice little cheque back from the tax office.

So even if the IP is CF+ by 2K/year, you may have 5K in depreciation.

Obviously the newer the house, the more the depreciation. Fixtures and fittings can also be claimed but I think the time span involved is different for different items. Eg: you can depreciate oven, HWS, carpets etc etc. Even if a house is older, you can still claim if it has had a reno done and new appliances fitted. If the property is rented furnished, depreciation can be claimed on the furniture.

I havn't had a brand new property so I can't tell you how much that could potentially be, but I have 2 town houses of about 30 years old and they had depreciation of about 2.5K each the first year.

A depreciation report can be done by a Quantity Surveyor, there are a few who lurk around this site.

Personally I wouldn't touch a company who had properties just waiting for me to buy. I would do it myself, search the internet at night after work, book some viewings, read up on property investing.

Altenitively, if you are time poor, I would definately look at using a buyers agent. In my opinion they will find you a far better property using a buyers agent than a company as you have described. You are employing them (the buyers agent) and they are working for YOU and have far more experience buying and negotiating than most. They arnt trying to flog off OTP (off the plan) apartments for a developer.

There are a few buyers agents lurking around here too. Put up a post asking for recommendations for a buyers agent in Melbourne if you wish but I suspect the few that lurk around here will be reading this soon and could give you more info.

Hope this helps.
I just had a quick look at their web site.

Let me get this right. They are flogging 'quality delux' family homes in Berwick that they have constructed (BS). All the bits and pieces like finance, accountants propert managers are done by an in house team. They have a rental guarentee for 3 years (a rental guarentee lasts only as long as the company does).

I dont know Victoria well but it looks like Berwick is about 60 km for Melbourne? What is the local infrastructure like, where do the people who live there work? These are things you need to know.

I have a problem with a couple of their statements on their site to justify investing in their properties.

"Market analysis shows Australian residential properties, especially land and houses, double in value every 10+ years. However our four bedroom executive style homes have doubled sooner in Berwick and surrounds."

Yes it may have, but just about anywhere in Australia has in the last 6 years.

"For stable financial gain in property investment, it is important you do your research and never invest in an area with more than 3% vacancy rate. Inner Sydney & Melbourne are currently at dangerous 8%-9% levels and worsening, while our investment properties in Berwick have never exceeded 1.5% vacancy since 1994."

I may be wrong but the part hi lighted in my opinion is so grossly untrue its laughable. Last time I heard Sydney had a rental vacancy of somewhere around 1% and has had for a few years. There may be isolated incidents in high rise apartments with this sort of vacancy due to a large number being dumped on the market all at once but generally vacancies are at an all time low and not getting any better.

I live in Newcastle and the rental vacancy here regularly dips below 1%. In fact I believe Newcastle is in Terry Ryders new list of the ten centres tipped for a property boom. Not that I'm pushing Newcastle but its just an example that you can probably invest in lots of better places. As I said I dont know Berwick, it may be about to go through the roof, it also may be about to go flat for the next 5 years.

Look, I may be cynical, they may be OK, but these sort of outfits pray on people like you who are time poor and don't know much about RE investing.

I'd suggest you go out and buy a whole heap of PI books and then you will have a better idea and will be harder to fleece. I'm sure there is a thread here somewhere with the titles of a few good ones. I havn't got time now to list them as my break is over and I have to get back to work.

Thanks Bespoke, this was just the kind of feedback i was after. We have brought dozens of IP mags and am ploughing my way through them, but I'm only just getting used to the jargon.

I agree that we would probably be best finding a plot, choosing a builder and doing it all ourselves , but having just done that for our own build and had huge problems I'm not sure that I fancy doing it all again. Also we had to keep coming up with the stage payments which was fine for our first build but would be an issue for an IP. L&G basically said that you put $1000 down and then its a 5 month build, with no interim payments until completion, it would be interesting to see how much say we had in the finished build.

If there's anyone who has done a new IP build like this out there I would love to hear how it went.

I'm now very skeptical of any of the project builders. Some people get great houses and some with the same builder are almost lucky its standing!! How do you know who to trust and go with (sales staff are just that and just promise the earth!!)? How much do you hassle the supervisor before becomes totally p*ssed off with you? and how do you decide what to let your builder do and what to organise yourself afterwards at half the price?

If anyone has a crystal ball for sale let me know!
Why do you have to buy new?

If you do, surely you can find a new house already built that is being sold or a house that is 1 or 2 years old.
We don't have to buy new, its just that I think that new properties tend to rise in value over the first few years on estates as they become established. Buying one a few years old would probably mean the original owners would be expecting a decent profit and I would imagine there are few "bargins" to be had. But I'm a complete novice at this and have probably got it all wrong, so please feel free to put me right!!! Better now than when we've signed somewhere on the dotted line!!!!!!!!!!!!!
Will all due respect (and I say this in the nicest possible way) you admit to being a novice yet you make the statement that new houses in new estate gain value quicker. Is this just a casual observation or have you really researched it? Have you taken the time to research any where else or any older properties?

When you buy a new house you will pay a premium for the fact that it is new unless you can find a builder or developer who is desperate to sell. But new houses do have more depreciation benefits. Think of it along the lines of a new car V a 1 year old car, looks the same but the person who bought new paid a hell of alot more.

And someone selling a house may be wanting a decent profit but a property is only worth what someone is prepared to pay for it. They may want say 400K but if buyers only want to pay 350K then that is what its worth. They either come down or the buyer goes up the road to the next property where the owners are more realistic.

Some question you need to ask yourself are

Am I buying for cash flow or capital gain you can get both but it is a bit more difficult to find. A new house will generally give you a lower % return than a older one as you WILL pay more for a new house than a comparable older one.

Do I want to be a passive investor (buy something new sit back for 20 years and do nothing ) or more involved.

Dont make the mistake of buying something because you like it. You wont be living there. Make a decision based purely on the numbers, make a decision with your head not your heart.

There is so much more I could tell you but I think you should read some more books not just API mags.

Good luck:)
Actually I just thought of one really good piece of advice.

If your dead keen on these properties, get a brochure with all the details and go see in person a reaal estate agent in that area who ISNT affiliated with the company. Ask them what they would sell that property for. In fact visit a few to get a general consensus.

There have been many many instances where people have bought properties this way to find out they have to sell 2 years down the track and then find out they cant get back what they paid because the property was over priced to begin with.

If you do this and find out they are OK priced and you are still keen then go for it.

I would be wary of using their "team of experts" though, you need a solicitor and finance broker who is working in your best intrests not the companies.

Geez Ive waffled on today. Sorry if I seem like I'm lecturing you, I just hate seeing people get ripped off. Do your homework on this and keep a healthy sense of scepticism. Make them proove their claims and then check it out.

Good Luck.