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About 'debt agreement australia'|Debt Rattle, July 30 2008: Mutilation of Old Money







About 'debt agreement australia'|Debt Rattle, July 30 2008: Mutilation of Old Money








               Buying               off               the               plan               is               when               the               house/unit               or               apartment               has               not               been               built               yet               or               is               under               construction               '"               this               is               now               a               commonly               used               property               investment               strategy               in               Canada.
               In               our               investing               careers,               we               have               purchased               several               properties               off               the               plan               that               have               been               very               successful               each               time.

There               are               many               benefits               to               following               this               buying               strategy               however               there               are               some               risks               too.
               Benefits
               ·               Lower               or               alternative               deposits               '"               which               means               you               can               use               a               lower               cash               deposit,               a               bank               guarantee               or               a               deposit               bond.
               ·               Maximum               tax               advantages
               ·               Stamp               duty               savings               in               some               states
               ·               Redesign               possibilities
               ·               Long               settlement               which               allows               potential               for               capital               growth
               ·               If               settlement               is               longer               than               12               months,               then               often               a               revaluation               at               the               current               market               price               can               allow               100%               finance.
               ·               Opportunity               to               on               sell               the               property               prior               to               settlement
               Risks
               ·               Project               may               not               proceed               at               all
               ·               The               finished               product               may               not               be               what               you               expected
               ·               Expected               capital               growth               doesn't               eventuate               or               may               fall
               ·               Developer               may               go               into               liquidation               which               stalls               the               project               and               ties               up               your               deposit.
               As               investors               we               always               had               our               solicitors               review               the               contract               however               we               have               found               that               sometimes               they               can               miss               things               so               as               a               rule,               we               generally               review               our               own               contracts               in               addition               to               the               solicitor.
               Below               is               a               list               of               items               that               we               may               expect               to               see               as               part               of               our               contracts               for               purchasing               off               the               plan               deals:
               Floor               plans               
               Building               plans               
               Site               plans               
               Electrical               plans               
               A               detailed               outline               of               fixtures               and               fittings               including               the               standard               of               quality               '"               some               areas               to               watch               out               for               are:               
               -               Kitchen               cupboard               construction               
               -               Exhaust               fans               in               kitchen               and               bathrooms               
               -               Heating               and               cooling               
               -               Floor               coverings               '"               type               and               quality               
               -               Wall               finishes               '"               type               and               quality               
               -               Window               dressings               
               -               Garage               door               '"               remote               or               manual               
               -               Letter               box               
               -               Clothes               line               
               -               Appliances               (white               or               stainless               steel)               model,               standard               or               its               equivalent               
               -               Fly               screens               
               -               Security               doors               
               -               Lighting               and               electrical               layouts               
               -               Extent               of               garden               beds               and               lawns
               We               once               had               an               experience               whereby               a               contract               for               an               'off               the               plan'               property               we               purchased               in               NSW               had               a               list               of               inclusions               that               included               a               dishwasher,               under               sink               water               filter               and               power               points               in               the               kitchen.

Being               from               Melbourne,               we               flew               up               to               Sydney               for               the               final               inspection               before               settlement,               and               we               noticed               these               items               were               missing               however               we               did               not               have               our               contract               with               us               to               confirm.

When               we               raised               this               with               the               builder               at               the               time               he               refused               to               correct               any               of               the               above,               claiming               they               were               not               part               of               the               contract.

Upon               returning               home               we               double               checked               the               contract               which               stipulated               that               these               items               were               included               thus               the               builder               was               legally               obliged               to               honor               the               agreement.
               Our               lesson               here               was               to               always               take               our               contracts               with               us               during               final               inspection               prior               to               settlement               and               to               double               check               that               all               the               inclusions               are               actually               in               the               property.
               I               have               also               bought               another               property               in               Melbourne               while               off               the               plan,               it               was               the               first               time               I               had               ever               bought               a               property               in               a               property               exhibition;               I               was               only               24               years               old               at               the               time,               and               come               to               think               of               it,               I               was               still               amazed               how               brave               I               was               at               the               time.

Luckily,               I               had               a               very               good               lawyer               and               he               had               gone               through               the               contract               in               details               with               me               with               his               colleagues               in               Victoria.
               What               turned               out               to               be               quite               an               unique               and               can               be               a               rather               complicated               issue               for               interstate               investors               are;               each               State               has               completely               different               laws               for               property               investments;               notably               Victoria               and               Queensland               have               the               most               different               rules               compared               to               other               States.
               There               are               also               issues               relating               to               stamp               duty               and               also               tax               payable;               whether               these               are               payable               during               the               settlement               of               the               contract               or               during               the               final               settlement;               so               that's               an               area               you               should               check               with               your               lawyer               in               details.
               Another               clause               in               contract               that               is               not               very               clear               for               may               is               the               "Sunset               Clause",               my               friend               bought               a               property               in               2002,               and               the               builder               put               in               a               sunset               clause               '"               a               date               whereby               the               property               must               be               completed               by               a               certain               date               or               the               developer               has               to               refund               the               deposits               back               to               purchasers.
               In               this               particular               case;               the               developer               left               the               sunset               date               open,               this               means               they               would               have               unknown               date               for               property               completion,               it               can               be               1               year,               it               can               be               10               years.

The               lawyer               later               found               out               that               the               developer               had               put               in               this               clause               open-dated;               as               the               developer               was               facing               financial               difficulties;               and               it               was               uncertain               if               they               could               complete               the               project               in               time.

The               contract               was               amended               and               a               date               was               agreed               that               the               property               must               be               completed               within               36               months               of               the               developer               will               refund               purchasers               the               payment               made               to               date.
               There               are               many               hidden               costs               and               potential               dangers               in               off-plan               purchases;               they               are               often               relate               to               the               issues               described               above;               typically               relating               to               developer's               financial               ability               to               complete               developments               in               time;               a               number               of               developers               had               collapsed               in               Australia               during               2002-2004               as               well               as               2007               and               2008               due               to               rising               debt               costs;               and               this               has               left               many               developments               unfinished;               with               investors'               deposits               locked               away               with               unknown               future;               these               are               particular               an               issue               in               Gold               Coast               areas               where               developers               are               promoting               holiday               homes               or               engaged               with               small,               private               developers               that               have               been               bankrupt               in               the               middle               of               construction.
               Back               in               the               very               hot               property               market,               almost               same               as               today's               market;               a               lot               of               investors               have               turned               themselves               into               "Off-the-plan               Property               Traders".

These               traders               buy               properties               during               the               off-the-plan               period;               with               the               aim               to               make               quick               profit               by               selling               them               to               the               next               buyer               before               the               development               is               complete;               usually               asking               for               10%               to               30%               profit.

Initially,               some               investors               did               make               good               profit;               for               instance,               invest               in               a               property               for               $300,000               off-the-plan,               put               in               $30,000               deposit               then               sold               to               someone               else               for               $330,000,               hence               made               $3,000               in               one               transaction.
               Eventually,               as               you               had               predicted;               the               property               market               crashed;               and               left               a               large               number               of               unfinished               developments               around               Australia.

Investors               either               pay               too               much               for               the               properties;               or               still               sitting               there               waiting               for               the               project               to               complete.
               The               worst               case               scenario               is               for               those               traders               who               were               unable               to               settle               the               property               when               the               development               is               complete               and               they               had               never               intended               to               settle               the               property               due               to               lack               of               funds;               they               were               the               main               force               behind               massive               "forced               selling"               in               properties;               and               had               caused               a               large               depreciation               in               apartments               market               in               QLD,               NSW               and               VIC               in               early               2004               and               2005;               which               eventually               led               to               the               crash               of               apartment               markets               in               Australia.
               While               I               have               personally               bought               3               properties               off-the-plan,               my               feeling               is               that               I               may               not               do               it               again.

Building               quality               these               days               are               much               worse               compared               to               back               in               the               1990s               and               early               2000s,               and               without               seeing               the               finished               property;               it               is               hard               to               justify               the               quality               and               predict               what               future               problems               may               occur.

Our               experience               is               also               that,               once               the               property               settled;               it               is               very               hard               to               ask               your               developer               to               come               back               and               fix               the               problems;               even               though               the               house               is               still               under               builders'               warranty.
               In               one               particular               case;               where               we               bought               a               townhouse               off-the-plan,               the               bathroom               was               leaking               3               times               during               the               first               year;               it               took               on               average               6               weeks               for               the               builder               to               come               in               and               fix               it               under               their               warranty!






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