Have a look in the real estate section of the papers and you will see some builders are offering ‘Special Incentives’ for a limited period……………………..so should you rush in to take them up?
Well I don’t think it makes any difference.
The ones that offer incentives seem to operate on a cycle of offers something like:
$30,000 of Luxury Inclusions for $2,000
followed a couple of months later by;
Free Theatre Room
then a few months after that by;
Free Air-conditioning and Landscaping
a little time later it’s;
Prices SLASHED by $30,000
then its back to;
$30,000 of luxury inclusions for $2,000
The truth of the matter is some of the builders add thousands of ‘marketing’ dollars to the price so they can make these ‘Special Offers’
The reason why they are limited is because they want you to sign up quickly rather than look around other builders houses.
I’m not saying that you aren’t getting a value for money house……….just don’t be pressured by the offer to rush in without thinking…….. They are not really ‘Free’, and there will be another different offer when the current one finishes.
Some small builders may suggest they can package build a house cheaper for you if you become an ‘Owner Builder’*.
*Not be confused with True ‘Owner Building’ where you have the skills and propose doing a lot of the work yourself
Here are 8 reasons why you should think very hard about doing this:
You remove the protection of the standard building contracts.
The whole exercise is about removing responsibility from the builder if this is their attitude at the start how confident are you they are going to take responsibility for any problems during the build..
Do you fully understand the responsibilities and risks which can include extra costs that can blow your budget.
Do you have all the knowledge, skills and time to manage the build properly.
You will have to take a course (May be available on line) which is going to take time. This will only give you the most basic understanding of the process.
Most banks are very reluctant to lend to owner builders so finance is going to be an issue.
You won’t have the advantage of any of the standard builders guarantees which means that if problems arise later you will have to meet the full cost.
When you want to sell many people can be reluctant to buy an Owner Built House without guarantees.
I have heard of several cases where this type of job went wrong but it may be successful for you.
When looking for a builder or a tradesman we are often told to get at least three quotes.
If you do this, and then just accept the lowest price you are taking a big risk!
Sometimes your choice may be affected because someone can promise an early start.
Lowest Price
Here are some reasons why taking the lowest price may not be a good idea:
The builder hasn’t got much work due to being inexperienced.
The builder hasn’t much work due to having a poor reputation.
The quality of the workmanship will not be as good as the higher priced bid.
The quality of the materials will not be as good as the higher priced bid.
Remember that you may not be around to supervise, so shortcuts and defective materials can be covered up.
In my line of work I have had to frequently accept quotations.
I have often added on a percentage to the lowest price to cover the extra supervision I think may be needed to make sure I get what I want.
Good Builders
Good builders and tradesman will generally normally have plenty of work so they don’t have to cut their prices, and because they are busy they won’t be able to start straight away.
They will use experienced workers and good materials, which will result in the best job for you.
That’s not to say the best builders are always the most expensive. Their bid could be low because:
They are closer to the site than others, saving travel costs.
Their skill and experience saves wastage and allows them to work faster.
My Recomendation
The best policy is to get at least three prices from reputable builders or tradesmen.
Make sure that when you ask for the price you have a written specification detailing exactly what you want.
If you, or people you know, don’t know enough about the builders or tradesmen be sure when you get the prices to get at least two references from the bid which looks the best.
Then follow up both the references preferably by visiting the site and talking to their clients.
You often see house and land packages advertised and they may have an attractive price . . . . . but are they a good idea?
Here are a few more things to think about:
These sort of deals are popular with property investors who just want to get a new house built and get tenants in as quickly as possible. . . Wouldn’t you prefer to have the houses next door owned by occupiers who are going to be more likely to care about the appearance of the house and garden than a tenant who has little interest.
It seems to me they are usually offered on the hard to sell and the least attractive blocks which is one reason why they are cheaper. Typical problems I have seen include:
On a major road
Poor orientation
Be an odd shape
Have access issues.
They are often based on the smallest possible block that will fit the house. Often they will have the houses so close together they will look more like a terrace and the back yard will be minimal.
One of the Real Estate maximums is that the way to make money on a house is by buying the right house.
Make sure you don’t harm your chances of a good future sale by buying a bad House and Land Package.
Some people say “never lend a friend money”, or “sell them a car”.
If things go wrong it can end a friendship!
I think it might be the same with getting them to do building work for you.
Reasons to think twice
Are they really ‘friends’, ‘friends of friends’ or just people you know?
Is there a chance they will take advantage of your ‘friendship’ to work at a slower rate because they are doing work for other people at the same time?
Do you really know how good at their job they are?
If they are doing it as a ‘friend’ are they insured?
Do you both agree on what the required quality of workmanship and materials will be? and is it written down?
How will you resolve things if you are not happy with the result?
Contracts give more certainty
I think that in something as important as building a house you need everything covered by contracts and insurances.
Also if you are a true friend to them you should be happy paying them a fair price for a good quality job.
I have got friends to do small things for me but for a major project I always prefer a fairly written contract.
This has enabled me to become friends of builders through building up a mutual respect.
The thing you need to remember when visiting a display house is it is not a real home, it’s more like a television set with tens of thousands of dollars of upgrades.
The builders want to show off their houses in the best light so you can’t blame them . . . but don’t forget you are buying your home.
Here are some of the tricks that big builders can use to make the house feel more desirable:
Internal doors removed to make it easier to walk around.
As much open plan as possible, but remember this won’t work as well when using it has a home. . . For example if someone wants peace and quiet while someone else wants to watch TV.
Higher than normal ceiling height.
Lots of mirrors and glass furniture.
Less furniture, for example just a bed and a bedside table in a bedroom.
If there are a couple of different sizes of the same model – the show house will be the bigger size.
Build on a larger than normal block to make it seem that there is more space around the house. . . or build two or more show houses with no fences between the houses.
Large windows to make the house seem light and airy. Remember the builder is happy to pay for higher heating and cooling bills for a year or so, if they get sales.
The minimum number of power sockets, remember the home entertainment units don’t have to work and nobody has to cook in the kitchen.
Some smaller builders may not even furnish the show house, which can make the rooms seem much bigger than they really are.
These are some of the things that you could see that won’t be in the standard package:
High quality kitchen and bathroom fittings.
Gas log fires
Expensive light fittings.
High quality tiles.
Landscaped gardens
High quality paving.
Water features
Fences.
Decks.
Other subtle tricks I have seen to make a show house more home like are are:
Coffee or baking smells to give a subtle message.
A few tins in the larder and cups in the cupboard but nowhere near how much you might need if you lived there.
A few clothes hung up in the Walk In Robe.
Toys in bedrooms.
A lace nightie laid across the bed in the master bedroom to make it more like a home.
One builder in the UK even paid someone to live in the house at the weekends, and show people round “our home”.
At the end of the day what everybody wants is a quality house built at the right price.
So does the size of the builder matter?
Here is my experiences:
Small Builder
We had our first Australian house built by a small builder and we were very satisfied with the result.
One of the reasons for choosing the small builder was that we had just moved to a small country town.
We felt that the well established local builder we chose must be building to a good standard otherwise he wouldn’t be getting work.
Also in a small town it was reasonably easy to find people who could give you an independent view about the quality to expect.
As the nearest large builders base was in a town an hours drive from where we were planning to build we were concerned that travel costs would increase the overall costs.
Further advantages of the local builder were he was happy to build the house to our design, and that he promised, and delivered on the promise, to complete the house in five months.
In spite of me being about the most “hands on” clients that he had ever had we became long time friends with builder. A good result all round.
Large Builder
Our last house was built in Werribee, by one of Ausralias largest builders Metricon.
For this Melbourne Suburb we felt that it would be hard to get reliable references for a small builder.
We decided that a large builder would do a good job as they would be keen to maintain a good reputation.
Having had a look at a number of show houses we felt that one of Metricon’s standard designs was fairly close to what we wanted.
They were also prepared to amend their design to meet the majority of our requirements.
For this house we were sure that travel costs weren’t an issue with several houses being built be this builder on the same estate.
One disadvantage with dealing with a larger builder is the whole process become more bureaucratic and it took a lot longer than five months to complete the house.
Perhaps you should check your contract before you sign it.
Apparently some builders require customers to sign a contract that: ‘Prohibits them from publishing anything about the builder without the builders express permission.’
That could include sending a rating to a ratings website, or commenting on an internet forum.
It seems to me that any builder that has a clause like this has something to hide on the quality front.
Homeownership is something that many of us aspire towards, and something that offers us the opportunity to secure our future and the future of our family.
The only problem is that homeownership is becoming more and more expensive as property prices rise and the market becomes more and more crowded.
Thankfully, to meet the growing demands being placed on the market, there are a number of innovative solutions being created to meet this opportunity.
We’ve all seen the property estates that are popping up in cities with a range of beautiful brand new homes available to purchase, often for a greatly reduced price as compared to the established homes within the city.
These estates are usually located within commuter distance of the city – another key selling point of many buyers and investors.
What you might not know however, is that it’s possible to purchase the actual display home that is used to showcase the houses available from the developers.
Yes, developers are building their showcase display homes and are offering these for sale to prospective buyers as a savvy way to achieve a great return on a property from the very beginning.
A display home is an attractive option for home buyers and we’ve created a short list of points as to why.
Buying an investment property is a goal for many investors as they seek to diversify their assets and to gain greater financial freedom.
An investment property that is a display home, means that you’re securing a great property which is landscaped and complete with fittings and furnishings.
How it works is that you purchase the display home, and the company then rents it back from you and continues to use it as a display home for a set period of time.
You can then use the rent to pay your mortgage.
This equates to a positive cash flow property with a very reliable tenant from the get-go!
During this time, the developer will also pay the outgoings like insurance, gas, rates and electricity.
When the rental period is complete, you’ll have the option available to you to move into your beautiful home; to sell it; or rent out the property to a tenant.
No Waiting Period
When you’re buying an off-the-plan home, the process is such that you pay a deposit on the home or land based on the price at the time, and then you make incremental payments during the life of the property as the building process continues.
Often, you’ll find that the property has already increased in value by the time your build is complete and you’ll be left with some equity – a huge bonus for any investor.
The only problem is that while you’re waiting for the build to be completed, you’re not obtaining any rental return on your property, so there is that to consider.
The perks of buying a display home is that you’re getting rental return immediately, and you’re also enjoying any capital gains that might occur on the property during the rental time.
Beautiful Home
A display home is the jewel in the crown of any estate.
It’s the house that prospective buyers are going to be seeing when they’re looking to buy, so it’s in the best interests of the developers to make sure that the display home is a stunning example of their best work.
What this means for you is that you’re going to be the proud owner of the best of the best as far as their houses go – which means that you’ll have a top-quality home with exceptional fittings, fixtures and coverings.
Well, these are just a couple of excellent bonuses that you’ll get when you purchase a display home, so perhaps take thee into consideration if you’re an investor looking to buy and seeking a positive cash-flow option for your portfolio.
