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Opportunity hidden within assets ‘demonised’ by investors
Examining house and land packages with the same depth as established properties can unlock hidden opportunities for savvy investors, as one expert goes head-to-head with one of the biggest investing taboos.
A $40 million property investor has challenged one of investing’s biggest taboos, revealing that half his portfolio was built through house and land packages, and shared his tips for choosing the right investment.
As market conditions shift regularly, investors have had to find new ways to generate wealth through property, often requiring a shift in strategy or asset selection.
Growing up in a housing commission flat in western Sydney, Buyers Club director Ali Hallak understands the challenge of building a portfolio from the ground up.
At 18, Hallak worked multiple jobs, including at a buyer’s agency, and saved a $35,000 deposit to buy his first property.
When he made his first purchase, Hallak said he wasn't sure where to start and leaned on a buyer’s agent who helped him negotiate the price down to $310,000.
“I remember buying the property for $310,000, and she was showing me comparables for $330,000,” Hallak said.
“I knew that it was just paper equity, but I was working nine to 10 shifts a week to save up. It took me eight or nine months to save up 20 grand, and here I am making $20,000 signing a piece of paper.”
He said that transaction hooked him on the investment game, and today his portfolio includes more than 60 rentals valued at more than $40 million.
With almost 50 per cent of his portfolio made up of new-build assets, Hallak built his wealth with a strategy that differed from the norm.
“Never demonise a product because there’s going to be guys out there that have made money buying that specific product.”
Building a portfolio from the ground up
He said a significant part of his portfolio's early growth came from buying land, which was steadily appreciating at the time.
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Hallak said buying a land release was significantly cheaper than in established regions, giving buyers a more affordable entry point, with house and land packages often overlooked by investors.
“We’re picking up a house and land that is four, two and two for $550,000. That land doesn’t register until 2027. You get in there with a 5 per cent deposit; it’s less than 30 grand, and you’re in the market,” he said.
“Then with market growth in that particular area, if you’re buying below market value and getting an average growth of six per cent, that would put those values at around $650,000, and you got in at $550,000.”
While many investors steered clear of house-and-land packages as an asset, Hallak said they still offered opportunities if investors approached them with the same view as an established dwelling.
He said choosing a quality house-and-land asset hinged on the same fundamental principles as buying an established home, such as accessibility, local infrastructure and incoming demand.
According to Hallak, another advantage of targeting land and developing a property or properties on it was less competition from the owner-occupier market.
“They want to buy completed homes because they have families, they have kids that want to go to school, so they want to get into a property straight away; they don’t actually want to build.”
“While many people think that buying brand new is overinflated, I actually show them that you can buy a house and land for cheaper than an established property in the same area. And many people don’t think that it is true.”
Compare, compare, compare
Hallak said investors should always compare these packages to established properties in the area and make sure they're getting a good deal.
“If you’re not getting the same price as an established property or you’re buying it cheaper, then I wouldn’t buy at all.”
Similarly, Hallak said investors needed to look beyond the bedroom-and-bathroom split, and that two properties could have the same room division for a similar price but differ drastically in layout.
“You have to compare what you are actually getting and understand what to look at.”
Additionally, he said it was important to vet builders, particularly their finances and defect policies, before hiring them to build an asset.
When vetting, Hallak said to look beyond their websites and brochures, and recommended calling local property managers.
“That’s one thing I do in any new market that I’ve ever been in. Because who is going to know the most about a builder’s quality?”
“They’re the first people that will know the conditions and the responsiveness and the overall quality of that particular builder,” Hallak said.
Listen to the full episode here
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