It’s been a busy few weeks since the last post and I’m pleased to say that everything went well and the property settlement went like clockwork. Although it always seems like a mad rush towards the end with getting all of the paperwork complete it’s great to have a reliable support network around you to ensure that everything happens as it needs to. Between conveyancers, property managers, owners corporations, solicitors and bank lenders the communication happened as it should and last week I collected the keys to the new house. Out of all of those people though it was my parents that eventually saved the day by helping me get the final piece of paperwork through on the day prior to settlement when I was unable to be in town…phew! Although I’ve been in the property investment game for over 14 years it’s still great to have a ‘first’ and last week it was the first time I’ve seen a brand new property built to add to the portfolio. It was so exciting to walk through the front door and have that new house smell (a slightly more expensive fragrance but similar to a new car smell). Everything was where it was meant to be and aside from a few small issues which I expected with a new build, everything was fantastic. The best thing though is to actually see it rather than read about it so check out my grand tour below!
The visit to the building site in February was the last time that we were able to set foot inside the building. From that point on it was a monthly drive past to see what the progress was from the outside and only being able to guess what things were like inside. In early March, progress had continued on the exterior with some of the finishing touches added to the brickwork and roof, as well as the fencing starting to go up. The concreting for the driveway had also gone in and the leveling of the front yard had been done.
Brickwork and facade is complete
The front yard has been levelled out
Driveways have been completed
The supervising team gives their stamp of approval!
A month later in early April on a dreary and rainy Ballarat day it was time for the next sticky beak and things had really progressed to a stage which was getting so close to completion that I could smell it (or it may have just been the smell of the paint drying). The fencing was finished outside, exterior painting was complete, letter boxes were in and even the lawn had been seeded and had started to grow. And for the next month the emphasis was literally on watching the grass grow.
The new lawn is under the water somewhere
Fences and letter boxes are complete
A view up the driveway towards the front of the block
Looking over the fence into the backyard,
Again, one month later at the start of May it was time for another visit and as noted, it was all about watching the grass grow…which it had. Aside from that, the landscaping was completed and it was now time to wait for the official subdivision information to be approved and then a settlement date could be set. Fortunately that didn’t take all that long and FINALLY it brings us to the current day! No more posts about things that happened 6 months ago. Tomorrow I’m visiting the site to have my pre-settlement inspection before the keys finally get exchanged next week (all going well). After 3 months since last stepping through the front door I’ll finally set foot inside to see the finished product. Watch this space in a few days to see what the finished product is like!
The grass has certainly grown!
And there are plants in the garden beds
It’s as good as finished
The communal parking area for guests
The last post saw the property on Boxing Day of 2014 and although it was no showpiece it was exciting to see the frame and roof of the house complete and to get a feel for the space and layout. With the Christmas and New Year break falling right in the middle of summer in Australia the world comes to a grinding halt so I wasn’t expecting work to recommence until the second week of January at the earliest. Still not having commenced the bricklaying and with all of the internal plastering and fit-out still to go I though I’d give it a month after the summer break before I returned back for another look to check out the progress. I was hopeful that the bricklaying would be finished and that internal work would be commencing soon. Not being a tradesman myself I’m clearly no good at estimating how long work takes. To my pleasant surprise when I returned at the start of February 2015 (yes, I’m finally writing about this year!) all of the brick work was complete and things had been firing along at a great speed inside. Now usually in a situation like this people that are not actually building the house (ie: me, Mike, mum and dad) aren’t often allowed on the building site in the off chance that we trip over a hammer or incidents such as this occur (although these seem to be largely based somewhere in Eastern Europe). But the great thing about having parents that will talk to anyone (and always seem to find some connection) is that before you know it the builder is inviting you in and showing you around. Inside, the plaster work was largely complete, the bathroom was coming along with the bath installed and much of the vanity in place, doors were being hung that day and even the majority of the kitchen cabinetry was in. It’s amazing the transformation when you actually have solid walls in place and you are able to walk through rooms. Even the parents were impressed. We left feeling really pleased with the progress and it finally gave me the feeling that the end was in sight.
Looking from the front at the finished brickwork
View from the lounge towards the front door
Looking from the master bedroom to the front of the house
The lounge and dining area
The smallest room in the house
The kitchen cabinets have gone in
Mike and mum evaluating the quality of the workmanship
The bath is in, tiling yet to be complete
The bathroom vanity
The view down the main driveway, our property is to the left of the ute
After celebrating the construction finally commencing in September 2014, the challenges of the 2014 renovation rescue took over my life and because I was up to my eyeballs in painting, landscaping and kitchen bench resurfacing, I left the builders to do their job and didn’t get a chance to visit the construction site for a number of months. A quick drive past the site in October saw all of the slabs poured but because there are 15 in the complex and our build is right at the front we were still waiting to see any major progress as the builders had commenced construction from the back of the block and were working forward. It wasn’t until late November that I managed to drive past and see that framework had gone up for most of the properties (except ours…) and it was Boxing Day in December when I really got a pleasant surprise with the progress of the work as you will see below.
By the end of December 2014 the framework was up, the roof and tiling had gone on, windows and external doors were in and the bricks had been delivered in readiness for this next major step. The plumbing work had been put in for much of the kitchen and bathroom as well. I was fortunate to be able to view inside the property at this point also and it was really exciting to be able to get a feel for the space that we had been looking at on paper for the last 12 months. Although the plaster work had not been done you could easily walk through the different rooms and experience the layout. Knowing that it was now the Christmas and New Year break I wasn’t expecting much to be occurring for the next few weeks. Check out the pictures below to finally see the skeleton of the property up at last!
Frame’s up, roof is on and the bricks have arrived
View from the rear of the property
Inside looking from the kitchen through to the living room
This is where the kitchen will be. A bench will be directly in front
Doesn’t look relaxing yet but this will be the bathtub!
Looking from the main bedroom, walk in robe on the left and bathroom on the right
View from the living area to the entrance hall
The properties behind were much more advanced as they started from the rear and worked forwards
I’m feeling very excited at this stage being able to see things happening!
Part 3 of the new build left us having signed the contracts in December 2013. Now we just sit back and watch the magic happen…or so we thought. Of course a lot of builders and people in construction take a well deserved break over the Christmas and New Year period and there were also permits still in the process so it was anticipated that work would commence (with demolition of the existing home) towards late February/early March 2014. What wasn’t anticipated was the local city council and the delays associated with obtaining a demolition permit to commence the work, closely followed by other delays in getting things signed off so that work could begin. OK, so these things can take time but as the months went by with no visible progress I did start to get concerned. Fortunately the agent put up with my regular calls to see what was going on and reassured me that things were progressing in order to enable works to commence. I know I’m not the only person to sometimes be a touch cynical about what real estate agents tell you so by the time July of 2014 came around I was ready to start building the place myself. You can imagine my relief when I was informed that demolition was commencing and things were starting to move…hooray! It was a useful lesson for me to learn regarding red-tape and associated paperwork and also that when it’s in a larger development you really don’t have much (if any) influence on the speed of the project happening. In August of 2014 the existing house on the block was demolished and work officially commence on-site September 1st 2014, 9 months after we signed on to the project.
By this stage I had started on my Renovation Rescue which had, in part, stemmed from the fact that the new build was taking so long and I was gagging to have another project on the go. Knowing that it would still take considerable time for the construction to be completed I was happy to have the renovation to go on with. Meanwhile back at the building site, temporary fencing, portable toilets, and a site office were initially set up. Then site preparation work involved the removal of existing vegetation from the site. The first stage of construction works on the project were the ‘civil works’. At this stage, all the services were run into the new complex with a deep service trench dug through the common area and the various services including power, gas, water, and telecoms laid in the service trench. Large amounts of rock were encountered during this process, which required special rock breaking machinery to be used which you can see in the attached photos.
Finally though, progress had started. I picked up my paintbrush and went back to the renovation in the hope that now progress would speed up, it certainly did!
The last update about the new build (Part 2) left us hanging after viewing a few examples of the builders work which looked good except unfortunately the development that we looked at just wasn’t quite right as far as the layout and location went. The great thing about real estate though is that there is always plenty more where that came from and after keeping an eye on various developments throughout the year there was one that sparked our interest in early November 2013. The location looked good and the project layout ticked the boxes, so after contacting the agent (a different one to last time) he offered to show us a completed example of the unit and off we went for a look. Now 10 months is a long time and I don’t have the best memory but it wasn’t until we were inside the property having a look (and after a few minutes of déjà vu) that I realised it was exactly the same one we viewed at the start of the year! I probably should have realised this earlier (as they were using the same builder) but nevertheless it was still good to have a reminder of what the property was like and additionally to see what it looked like after someone had been living in it for almost a year. Interestingly, it was good to view the exterior of the property and reflect on how it compared to the original marketing picture vs. the finished product. You certainly wouldn’t class the front lawn as a bowling green (one of the issues I have with seeded lawn rather than roll-out turf) but following up recently (via Google Streetview) the owner has competely changed the front garden anyhow. Check out the pics below.
Having another look confirmed that we were happy with the quality of the product and speaking to a current owner of a very similar property on our visit also helped. After this we then drove to view the development site. Unlike the one earlier in the year, this was a large stand alone block of land (except for an older house soon to be demolished) and it was bordered by a school on one side and a large block with an old historic blue stone house on the other. It was near a lot of local amenities including shops and public transport as well as it being on a secondary road rather than a main arterial road like the one viewed in January. After a few nights sleeping on it (as I’m prone to do) and looking over the sales brochures many, many times, we decided to do the deal and signed up to purchase lot 2 out of the complex. I’ll explain my reasoning for picking this one over all the others in the next post. Check out the pics below of the building site and a few people enjoying seing another sold sticker on a sales board…we do love those sold stickers!
Stay tuned for the next gripping post which could possibly end up with the riveting title of ‘Sit and wait’…
As nice as it is to drool over the multi-million dollar homes of the rich and famous and clutch your pearls in shock at the amazing prices that are being asked, it is also reassuring to realise that the people buying and selling these homes are still subjected to the challenges of trying to move real estate (there are just a few more zeros on the end of their checks than you or I would most likely write). A few posts that I put up in the past are worth going back to and seeing what the outcome was.
The Liongate Estate that I wrote about last month was up for sale for a cool $65 million. Coming fully furnished throughout it’s 23,000 square feet and featuring 11 bedrooms, 17 bathrooms and even it’s own panic room it’s an absolute steal at that price. Amazingly though, someone thought that was too expensive and decided to bargain with the vendor. Lucky they did because they were obviously a motivated seller and subsequently dropped the price by a whopping $19 million (that’s almost a 30% discount!). So the lucky purchaser picked up the property for $46 million and although heavily discounted, the owner has still made a nice little profit considering their original purchase price of 12.2M.
Earlier this year I wrote about Harry Potter actor Daniel Radcliffe putting his local Toorak penthouse up for sale. After owning it for 10 years and originally purchased when he was filming a movie in Australia as a teenager, he hoped to make a nice little $600k profit. After what would likely have been an expensive marketing campaign and also having moved his furniture out and getting the property professionally styled for sale he has recently pulled the property from the market. Rumor is he has another film project in the pipeline locally and might need to keep a place to unpack his carry-on luggage.
If you’ve been saving your dollars for either of these previous gems, don’t be upset that they are now off the market. There are still two properties that you can pick up. Michael Jordan’s house that I wrote about in November 2013 is STILL on the market after failing to sell at auction last year (it may have been the $250k registration fee that put people off). Originally for sale at $29 million, you can now pick it up for $16 million!
Or if you want to live beach side in Australia then you may recall the stunning Mandalay House that I wrote about in January 2014. $25 million is what the vendor originally wanted for this tropical paradise but now it’s being marketed as ‘price reduced’. Whilst no figure is being attached to this campaign I’m sure it will be enough of a saving to get that private helicopter that you can land in your front yard!
Barely a day goes by in the media that there isn’t an article published discussing the challenges of the Australian housing market and how much prices have risen over recent years. The long held ‘Great Australian Dream’ of owning your own home is frequently trotted out to tug at the heart strings of TV viewers when trying to find a suitable scapegoat for sky high property prices. Throughout much of 2014, focus was being placed on foreign investors landing on our shores with suitcases full of money and pricing us locals out of the market. Currently the place for blame is on negative gearing. Whilst I’m happy to agree that negative gearing may have had some contribution to price rises, it’s important to take into account the huge amount for factors at play here. Although I’m no economist, it doesn’t take a genius to realise that the combination of negative gearing, foreign investment, historically low interest rates, ease of finance, ongoing agent under-quoting and the sense of urgency portrayed in the media all play a role. Not to mention the fact that almost 70% of Australians choose to live in capital cities and that there is only so much land available in these relatively tiny pockets of our enormous country. Geography and demographics certainly play a role.
Of course I’m biased…but while I do think that negative gearing has an important role to play in supporting investors and in turn the housing market in Australia, I agree with statements made regarding investors only investing in property simply for the tax advantages. To me, purely investing for the benefits of negative gearing is completely the wrong approach (although plenty do it). Following here are two videos worth a watch. The first is a clip from ‘The Project’ on Network 10 which aired last night and fired me up to write about this topic. Pay careful attention to the generalised statements and overall tone of the clip, it’s enough to make you go out and push the nearest property investor under a bus. The second clip by well known Australian property investing wunderkind Nathan Birch is intriguingly entitled Negative Gearing Sucks Balls. Nathan’s explanation about negative gearing and why people get caught out by it is spot on in my view. My thoughts? Negative gearing is a useful bonus for investors but certainly not a reason in itself to invest in property. Check out the clips below and make up your own mind!
One thing that I always do when looking at any type of new property is to get the camera out and take a lot of photos. It’s great to have a visual reminder of what you’ve seen and with digital it’s also usefull to have dates that the photos were taken. This has been particularly handy when I look back over the time that this new build has been in the pipeline. Amazingly, sifting through photos reminded me that the very first steps on building from scratch were taken over 2 years ago in early 2013. It had been around 12 months since the last property purchase and that’s usually around the time that I start to get itchy feet and think about what the next step could be to expand the portfolio. As I mentioned in the last post there are a number of attractive options about buying off the plan and it was exciting to think about trying something new and learning about the construction process rather than simply another established property. So it was time to get out and see what options were available.
When an agent is marketing a new development they will often have lots of nice glossy brochures with lovely architectural drawings of brand new homes surrounded by lush landscaping and beautiful, well established trees. Whilst these pictures look nice, it’s important to see some real-life examples of similar projects. In January of 2013 I spotted a new project that looked promising and the agent was able to take me to view a similar project (by the same builder) just nearing completion. The new project designs were very similar to the one I was interested in and as you can see from the attached pictures it’s useful to be able to view the finished product from the outside as well as the finishes inside.
Having seen some examples of the finished product it was then time to go and view the proposed site of the development. One thing that is not uncommon in this area is to see older homes on massive blocks of land where the owner sells off the majority of their land to a developer and remains in their original house. This was what this proposed development was and unfortunately I’m just not a fan of it. You end up with a bunch of new homes sitting in what was the back yard of an older house and you have a narrow driveway going down the side to access the residences. Also, the old house in the front of this development wasn’t an architectural masterpiece and the actual location of the development was right on the edge of town. It just wasn’t quite what I was after. The quality of the properties, yes; the location and project layout, unfortunately not.
So although it was back to the drawing board (to an extent) it certainly wasn’t a waste of time. I had a good idea of what you could get for your money, the quality of the product and also what I was after as far as layout of a development.
Fast forward 10 months…
So it’s been a while since I’ve posted a blog about what’s been happening in my world with regards to property. Whilst the major activity for 2014 may have appeared to be the renovation rescue, there was something else going on in the background that had started well before I signed on the dotted line for the reno property; a new place, built from scratch! In late 2013 a new and exciting part of the property journey commenced with contracts signed to build a new 2 bedroom townhouse in a suburb of Ballarat called Sebastopol. All of the properties purchased so far have all been established homes aged between 10 and 40 years old and although they have all been very successful there are certain benefits (and some drawbacks) to buying off the plan and building something new.
- Firstly, you get everything brand new and one would hope that it means things work, it looks modern, attracts good rent and requires minimal maintenance as it has new appliances and services.
- Secondly, a new property brings with it substantial depreciation benefits at tax time. With the older properties you can claim depreciation on the fixtures and fittings within the property (carpets, curtains, heaters etc) but if a property is built after July 1985 then you can also claim depreciation on the actual building itself. This can make a significant difference with your tax return and subsequently how you manage the cash flow on your investment. (Check out this previous post for an overview of depreciation).
- Thirdly, you can manage to save significant money with a reduction in the stamp duty that you pay on the purchase of the property. When purchasing off the plan the stamp duty is calculated on the property value when the contracts are signed. For a property such as this it’s based on a vacant block of land with nothing built on it so is a lot less than if it was an already established home.
- On the flip side, a major drawback with a new build is the amount of time that it takes. The contacts were finalised in December of 2013 for this property and with a scheduled start date of Feb 2014 for building it ended up being pushed into the second half of the year due to demolition issues with a house that was already on the land. The anticipated settlement is April/ May of this year (I’m expecting May).
- Another thing that would work for some and not others is that you have little (practically none at all) scope to make any alterations to the design of the property itself. I certainly don’t mind though as it’s a good design and a build for investment, not to live in. That said, you do get a selection of interior options regarding cabinetry, paint, carpets etc.
So activity started in the second half of 2014 and I’ve been regularly stalking the builders to track progress. Keep an eye on future posts to see how the build progressed and if it looks anything like the pictures above!