Some savvy property investors are reaping extraordinary profits by providing pre-seed funding for property projects.
Normally, this is the domain of very wealthy investors taking high risk, however, it’s now becoming possible to acquire properties worth $400,000 for as little as $150,000.
In a new way to help get projects off the ground, some developers will sell some stock at or below cost price to a select few in order to lock in capital to settle land and fund the DA.
Generally considered high risk, one such project developer that ANR interviewed said, “on some occasions developers will even offer first mortgage as security till the separate villa titles are ready, thus reducing the risk greatly in case the project doesn’t proceed”.
He continued to explain:
“One example we found was of investors getting 5 star two-bedroom villas with a retail value of $400,000 AUD for only $150,000 AUD with expected completion within 12-15 months. These villas are fully managed by Wyndham Resorts, which is a multi-billion-dollar company”.
However, the spokesperson said that for many it sounds too good to be true and for
most it is, as more often than not, only a very limited amount is released at those prices.
He says, “in one development we are releasing six 5-star luxury villas for only $150,000 each with their own pool in Vanuatu close to Cascade Waterfalls in a beachside project that will feature three 5 star resorts, 70 villas, 60 tree-houses, a casino and a theme park.
“When the jump-in price of $50,000 per month to the DA is completed in say 3-6 months, they are then sold at retail mostly to Chinese investors.
“The income returns are projected to be up to $100,000 p.a., thanks to the high occupancy rates expected (Wyndham is achieving over 90% occupancy at its latest South Pacific Resort in Fiji).
When quizzed if such deals become available in Australia, he said, “not as likely because land costs and DA costs are much higher, therefore, developers tend to have to borrow funds and consequently can’t offer first mortgage security- making it a much more riskier investment for investors”.