# Buying property no money down...



## dj_420 (20 September 2006)

There was a ASF member who was talking about buying property without using large amounts of capital. just wondering who it was as i am interested in the technique and wanted to ask some advice.

this was in regards to property development, either commercial or rural

anyone who is knowledgable in this area please post some opinions


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## tech/a (20 September 2006)

In general terms without collateral in something of recognisable value from a lender your pretty well out of luck.

There are ways to get going but VERY risky if you dont have a financial backing.

I have heard of people taking out options to purchase and forward selling at the day of settlement.
You have to have the legal eagals look over the options to see if it can either be assigned or transferred.
Ive also heard of long settlements and on selling.
Ive also heard of vendor finance in a developement.
IE the Vendor supplies the land the developer enters into an arrangement with the vendor to share part profits limited to X upon completion and sale of the developement.
The developer then sells off plan,and finances the developement from the sale of the land (which isnt his---but has the arrangement--vendor getting more for property).
Pretty hard to do if you dont have a track record.

This is just what Ive heard not offered as advice---simply hear say.


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## dj_420 (20 September 2006)

ill just keep replying in this thread so i dont muck up the other one

so say i have 35 k + in shares would that be considered as significant amount to use as collateral?

only other way to swing it is to talk a relative into the whole enterprising idea,
i feel a good option is to get a nice acreage mid north east coast and subdivide, so paying for development for subdivision and then splitting off blocks of land


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## tech/a (20 September 2006)

Once liquidated would get you around $60K from a lender for high risk (And youd be seen as high risk) venture.

Subdividing acerage will set you back considerably more.


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## dubiousinfo (20 September 2006)

Given you have no track record and intend to subdivide, I would be surprised if the banks would match your $35k with any more than about $50k. Banks dont like rural. As Tech said this will not finance a subdivision. 

Also, if this is your first time at property investment, subdividing rural is very risky & I wouldn't recommend it.

You would be better off purchasing a house on a large block & subdividing that. You would then get a feel for how long it takes, the problems that can arise & the costs versus profit that can be made.

As with the market, its a good idea to start with simple shares & get some experiance before jumping into CFD's & options.


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## nizar (20 September 2006)

A mate of mine in reservoir, a suburb in melbourne, bought a house and land for like 200k, spent about 100k all up building another house (he and his bro built it himself), sub-dividing the land into 2 blocks, and then sold one for 250 and the other for 270 about 2 years later.

It look 6 months for the council to give him the permit to subdivide and it cost about $10Gs


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## cogidubnus (20 September 2006)

nizar said:
			
		

> A mate of mine in reservoir, a suburb in melbourne, bought a house and land for like 200k, spent about 100k all up building another house (he and his bro built it himself), sub-dividing the land into 2 blocks, and then sold one for 250 and the other for 270 about 2 years later.
> 
> It look 6 months for the council to give him the permit to subdivide and it cost about $10Gs



What a lovely suburb. They must have done this some years back because everyone has been their and done it.


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## dubiousinfo (20 September 2006)

nizar said:
			
		

> A mate of mine in reservoir, a suburb in melbourne, bought a house and land for like 200k, spent about 100k all up building another house (he and his bro built it himself), sub-dividing the land into 2 blocks, and then sold one for 250 and the other for 270 about 2 years later.
> 
> It look 6 months for the council to give him the permit to subdivide and it cost about $10Gs





There are certainly opportunities like that around. From your numbers, he has made around $210k over 2 years from $310k, around 30% p.a. I think. Good money by anyones standards.

Obviously there are no hard & fast rules, but as a very rough rule of thumb, developers of buildings generally look for a minimum on 20%p.a. & developers of in globo land around 30%.


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## robots (20 September 2006)

hello,

in Melb doing this dual occ is high risk at the moment if using borrowed funds

permits are taking "too" long in all municipalities, holding costs can be extreme

many councils now want landscaping plans as part of sub-division and for landscaping to be completed for C of O

this is adding around 7k - 10k

utilitiy contributions are increasing or are being forced to put reticulation systems in for instance

you are paying for the infrastructure

typically X amount will be knocked of the front house price as well

thankyou
robots


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## REA (20 September 2006)

I would also recommend buying a home on a large block paying it off for next couple of years and then doing either a dual occupancy or building a second home.

A few points I have learnt over the years.

     Find out Council requirements.
     For a person starting out buy where you can see precedents it helps.
     Get approval ASAP Council change rules all the time.

If NSW I recommend seaside locations up or down coast and single storey villas(for Realists wrinklees')


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## dj_420 (20 September 2006)

some good points

1 - need a very large amount of start up capital for any sort of development.
2 - can be risky due to holding period if bought on borrowed funds.
3 - local govt restrictions such as development laws can come into play.

what i really would like to do is save up enough to get block of land (20 acres) in an high growth area that is still relatively cheap at the moment, eg qld somewhere, put in sub-division app so the process is started.

i know if once you have begun subdivision you can take up to a certain x amount of years to complete the subdivision, so you are effectively cutting red tape if development restrictions come into play further down the track.

for eg on the central coast development restrictions were put in place around 5 years ago. however if you had an app in previous to that and were still in the process of sub-dividing this would not effect you.

so i think that demographics of the region and future considerations would play a great deal in selection process.

i like the idea of hervey bay, high growth rate prices are still reasonable. infrastructure supports new levels of growth (new airport). buy a big block (acreage), hold onto it for 10 years, have an sub-div app in then carve it up after market is in upswing.


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## Stan 101 (20 September 2006)

have you factored in your rates and the interest on the loan?
remember you will probably be up for head works on the sub. 
Also, once the titles have been created, you will be paying full rates on every block individually. This will include water and sewerage surchases.

I purchased a block that had been two blocks amalgamated onto one title. One would assume this would be a simple case of split it back down the original boundries add water to the recreated block and get some titles. What I estaimated to be 8 weeks maximum took over 12 months and there wasn't a damn thing I could do about it. Was good for about a 300% return, so that made the hassle seem obsolete in the long run..

I suppose what I'm saying is factor for worst case scenario and double your timeframes. Happy hunting

Cheers,


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## nizar (21 September 2006)

dj_420 said:
			
		

> what i really would like to do is save up enough to get block of land (20 acres) in an high growth area that is still relatively cheap at the moment, eg qld somewhere, put in sub-division app so the process is started.




Very very huge amounts of money was made in queensland some years ago now... One of the directors of One.Tel or some other telco that used to be based in sydney bought several hectares of land only about 30km from Brisbane (but then it was the sticks) for like $7million back in 1997-98 and he subdivided it and sold it off over the next 5-6 years just when the boom was kicking in and made obscene amount of money, like about 100mil. I read in the AFR ages ago but cant remember much detail.

But these days im not sure wheres the next boom will be. Always opportunity i guess, u just gotta keep your eyes open and be in the know.

Also - is there any laws against insider trading to do with property? Say if u know a mate who works for Mirvac and he tells u to buy some land coz its the next place they will develop...??


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## tech/a (21 September 2006)

> what i really would like to do is save up enough to get block of land (20 acres) in an high growth area that is still relatively cheap at the moment, eg qld somewhere, put in sub-division app so the process is started.




Firstly it needs zoning approval without that you wont have a chance in hell to subdivide.

Any decient pieces of land zoned or about to be zoned will be known by the professionals,you'll never see it go on the market.
To be honest with you you are aiming too high.

Land is a non income producing proposition,accumulation and subdivision is usually for those with considerable funds.

You need something that is generating some$$$s to offset borrowing interest.

I'd look for a large corner block with a house on it near the sea that can have a portion sub divided off of that.Sell the block decrease the initial loan and use the equity to do it again.---but thats me.


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## happytrader (21 September 2006)

dj_420 said:
			
		

> There was a ASF member who was talking about buying property without using large amounts of capital. just wondering who it was as i am interested in the technique and wanted to ask some advice.
> 
> this was in regards to property development, either commercial or rural
> 
> anyone who is knowledgable in this area please post some opinions




They are 'buying off the plan' or if they don't have a deposit they've purchased a deposit bond. The usual intention is to sell on or before completion to realise a quick profit.

Cheers
Happytrader


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## Stan 101 (21 September 2006)

tech/a said:
			
		

> I'd look for a large corner block with a house on it near the sea that can have a portion sub divided off of that.Sell the block decrease the initial loan and use the equity to do it again.---but thats me.




Some very wise words there Tech. That can be a nice little earner...


cheers,


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