Why buy crap, when you can get quality

[Smarty]

Hi All,

I am planning to build my investment property portfolio like many of you reading this post. Recently I am thinking of bringing like minded people on board, buy land and hire builder/contractor to build apartments. We all know buying existing or off the plan apartments will cost us more because of the huge profit share going to builders, sales people and so on.

Let's say we buy land and build 3 Floors high ( 3 X 4 Apartments =12 Apartments). If 12 people are looking to buy either their first home or investment property and they are willing to pay $400-500K each to buy existing or off the plan unit, 100% they WON'T get apartments built using best quality material (builders only work for profit not for quality).

Instead of buying crap or close to crap, why not we buy land, hire a builder, use best material for long life of the building and less maintenance going forward. I am sure with little effort we can save a lot and get better home.

I don't know how much will it cost to build 12 apartments, but won't be more than what we pay if buy from someone else.

I am interested in making a group of 12 people from different backgrouds, who can bring their expertise from different fields on board, share their ideas and work in a team to build either their first home or property portfoilo.

Following fields can be considered as an example
-Property Accountant
-Tax Accountant
-Solicitor
-Builder/Contractor
-Sales Rep
-Banker
-Mortgage Broker, etc

By the way, I am 28 male, working as Financial Management Accountant. I also have Computer Science degree.

I am open to any suggestions if you have a better plan.

Hope to hear from like minded people, No time wasters please.

Regards

[Maccachic]

Highly recomend getting a registered building surveyer to project manage the process - regular inspections by a suitably qualified independant party will pick up and highlight any deficiencies when they can be fixed and before they cause big issues, also means payment claims can be overseen and any errors/descrepancys picked up which can save a lot of money on a project.

[Rosco]

Few questions or points;
1) Do you really want apartments? I always prefer stand alone houses if possible, ie standard 4 bedroom house, with a normal section to rent to a normal family
2) In many places it is still cheaper to buy someone's mistake, then to build a new property. This will change over time.
3) Developers, builders etc aren't making that much at the moment
4) If it is your, the groups, first project, then generally mistakes are made, which might mean its costs you more than just buying from someone else.
5) Going into business with 12 people can be awkward

Ross

[davtam]

Hi Smarty

Is this your first building project?

[charlotte30]

Why buy crap, when you can get quality

Hi smarty

If this is your first project it is ambitious and fraught with problems. Do you have a strategy to deal with these? Finance and ownership are one of the biggest issues. Basically Legal ownership of the apartments stays with the landowner until title is completed. In my experience it gets very stressful when you are pouring money into a project that you can not take legal ownership of until Title. I have Project Managed 8 apartments with a family member and one other owner. It worked out well but I would not go down the path again. I prefer to own the whole project. I suggest that you start with a smaller project.

Cheers
Charlotte30

[Smarty]

Few questions or points;
1) Do you really want apartments? I always prefer stand alone houses if possible, ie standard 4 bedroom house, with a normal section to rent to a normal family
2) In many places it is still cheaper to buy someone's mistake, then to build a new property. This will change over time.
3) Developers, builders etc aren't making that much at the moment
4) If it is your, the groups, first project, then generally mistakes are made, which might mean its costs you more than just buying from someone else.
5) Going into business with 12 people can be awkward

Ross

Hi

I prefer stand alone houses, but it's too expensive to buy land and build just single house. For investment, apartments have good return and easy to resell.

[Smarty]

Hi Smarty

Is this your first building project?

Yes davtam, just thinking at the moment

[Smarty]

Hi smarty

If this is your first project it is ambitious and fraught with problems. Do you have a strategy to deal with these? Finance and ownership are one of the biggest issues. Basically Legal ownership of the apartments stays with the landowner until title is completed. In my experience it gets very stressful when you are pouring money into a project that you can not take legal ownership of until Title. I have Project Managed 8 apartments with a family member and one other owner. It worked out well but I would not go down the path again. I prefer to own the whole project. I suggest that you start with a smaller project.

Cheers
Charlotte30

Hi mate,

Just wondering, if 12 people want to buy apartment and have their finance approved. I think this will solve the problem of financing. I am not sure if land can be bought on name of 12 people, but i guess a company can be set up to own the project and 12 people become investors, and after completion of project, contracts can be signed to allot apartments.

[charlotte30]

Hi mate,

Just wondering, if 12 people want to buy apartment and have their finance approved. I think this will solve the problem of financing. I am not sure if land can be bought on name of 12 people, but i guess a company can be set up to own the project and 12 people become investors, and after completion of project, contracts can be signed to allot apartments.

Dear Smarty
What would these 12 people be using as security? If you are looking at using the proposed property there are complications with the parties being equally and severally liable for the mortgage. A discussion with a mortage broker would be useful to determine the financial way forward. Yes, property can be bought in the name of a company.

Cheers
Charlotte30

[Winston001]

Nothing wrong with your idea in theory but getting 12 people together who can put their hands on $250k each is a different matter.

My experience of groups owning property is that 4 couples (8 people) is the absolute maximum. I suspect your 12 is really 24 people if each investor has a partner.

That is why property development is normally conceived and driven by one or two people, financing the project by persuading a bank they know what they are doing. Alternatively they get organisations like Money Managers to form a syndicate of mugs...er, hopeful investors.

[eri]

why buy crap when you can get quality?

because i can afford crap

i can't afford quality

[Smarty]

Nothing wrong with your idea in theory but getting 12 people together who can put their hands on $250k each is a different matter.

My experience of groups owning property is that 4 couples (8 people) is the absolute maximum. I suspect your 12 is really 24 people if each investor has a partner.

That is why property development is normally conceived and driven by one or two people, financing the project by persuading a bank they know what they are doing. Alternatively they get organisations like Money Managers to form a syndicate of mugs...er, hopeful investors.

Thanks mate, useful information

[Smarty]

Dear Smarty
What would these 12 people be using as security? If you are looking at using the proposed property there are complications with the parties being equally and severally liable for the mortgage. A discussion with a mortage broker would be useful to determine the financial way forward. Yes, property can be bought in the name of a company.

Cheers
Charlotte30

Hi Charlotte,

When people buy off the plan apartmennts or land and building package, what security do they use to get finance approved? I guess if 12 people are ready to buy and want to save money, buying land on the name of a company and then hiring quality builder for everything else (just like land and building package -where you hire builder and builder looks after design, approval, building & everything else). Buying in bulk is cheaper than buying single -old saying.

Cheers

[Davo36]

Smarty did you read the articles in Saturday's Herald regarding building costs? http://www.nzherald.co.nz/nz/news/ar...ectid=10805332

They talk about apartment costs vs houses. Basically apartments are really dear to build.

Nixon applauds the intention but believes it won't have much effect. He says most local builders are one-man operators, who won't touch apartments or most multi-unit housing because the building materials and add-ons (such as stairwells, lifts and carparks) made them too expensive.

"You can build an apartment building for around $3500 a metre in construction costs, you can build a really top-end signature home for $1500 a metre. It's just not rocket science that you're going to get more for your money from a house."

Which is why no one is doing it.

[charlotte30]

Why buy crap, when you can get quality

[QUOTE=Smarty;276073]Hi Charlotte,

When people buy off the plan apartmennts or land and building package, what security do they use to get finance approved?

Usually the security is with the developer who would have a number of pre-sales to satisfy the bank. Valuations are also used to verify the price to enable sales. Purchasers then pay a deposit until Title is ready.

I guess if 12 people are ready to buy and want to save money, buying land on the name of a company and then hiring quality builder for everything else (just like land and building package -where you hire builder and builder looks after design, approval, building & everything else). Buying in bulk is cheaper than buying single -old saying.

I agree that buying in bulk is cheaper. Your plan is workable but a lot of work needs to be done on the detail for it to be a success.
Cheers
Charlotte30