Too Weak to Defend Part 7 – Buy Land and Build

“You can build a house for well under $400,000. And, then rent it out at $450 a week; easy!” Said Jeff with a bounce in his voice. Jeff was the agent selling house and land packages in a new development in Alice Springs called the Rydges Estate. It’s located off Larapinta Drive right at the very end of Albrecht Drive. He was talking my language. I was looking for more deals. The numbers told me this was a deal.

I liked Jeff from the start. He’s very personable and knows his stuff. He’s also very enthusiastic and has a magnetic personality that draws you in. I wanted to buy what he was selling. He was selling a good property deal. He helped me to draw the picture in my mind. I liked what I saw.
“I’ve got a block of land for $159,000 in the new development. If you buy it, then put a house on it for $225,000, you’ll rent it out all day long for $450 a week. Where you going to find a deal like that?” Jeff was selling me.

He continued. “I can work a design for you and organize a builder. And, I’ll be there with you throughout the entire building process. Building is the way to go.”

“Oh, I almost forgot. You also get the Buildstart grant. That’s $14,000 in your pocket from the government for building a new house. And, more good news, there’s no stamp duty on the building, only on the land.” He added. The deal kept getting better.

I liked it. You mean I can get a brand new 3 bedroom house for $400,000. And, since it’s a new build, the government will give me a $14,000 rebate. And, no stamp duty on the building. This was exciting.

Another important aspect I like about this deal was … there was nobody else around! No bidding war. The buying frenzy crowd seemed to congregate over to existing homes. There seemed to be a very short line on the “new build” side of the house (no pun intended)!

And there’s a reason for this. A new build involves more risk. You have to wait for the finished product. You have to rely on a builder. And builders have been known to be challenging to work with. They’ve been known to go bust. These are risks that a lot of people are unwilling to take. Therefore, there’s less competition.

Also, there was another catch. Another risk area. The land for sale had no title yet. It was still in the developers possession awaiting the necessary works required for title issue. Titles would be issued once the developer had complied with all the local government requirements for a new housing area. The project was delayed and people were getting frustrated. When would titles be issued? This unknown worked very well for me. It meant less competition. And, basically, I didn’t really care if title issue was delayed. I figured the longer the better. It would give me time to get my finances better organized.

So, on 22 Feb 2009, I gave Jeff a $2,000 deposit for a block of land in Rydges Estate. This deposit – and the signed contract – got me the block for the handsome price of $159,000. I thought this was a bit much for an 858 square meter block of land at the end of Albrecht Drive. But, the numbers made sense. If the total house and land price came in around $400,000, it was a good deal. I was excited.

Now it was just a matter of waiting. Waiting for title issue. This required the developer to pass the town council requirements for infrastructure. Once the street was paved, street lights in place, sewer connections completed and all other required works completed, titles would be issued.

And, it was a long wait. Titles were finally issued in August 2009. We closed the deal on 28 August; the block was ours. But, a lot had happened in the meantime and we had other plans for this block of land. I’ll tell you about that later.

But, now let’s talk about what happened to change our plans. You probably already guessed it; we got another property.

Story Continues … read Part 8.