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A developer's 57% cash-on-cash return + property at 21.7% discount without all the work.
Hotspotcentral has been fantastic, the project has run smoothly and the finished product looks great. I knew Michael had some of the best people on his team. Discount achieved in 11 months was $90,500...rents achieved 10% higher than original agent appraisal. Annualised cash returns 57% on money invested. Property cash flow positive. So in short really happy with the return – as this is a developer's return without all the work. I would definitely recommend Hotspotcentral and this strategy to my friends and family as my experience has been great.
I had been looking for investment strategies that offered the chance of excess market returns
I found Michael very easy to deal with. He operated with high level of integrity, objectivity and enthusiasm, but what also appealed to me was the high level of sophistication and innovation he brings to the area of residential property investment. I had been looking for investment strategies that offered the chance of excess market returns. Property development seemed to offer this, but not at digestible levels of risk for me; particularly for my first wholesale investment. Michael offered me both these things. The research was what first got my attention; a way of bringing a level of objectivity to property analysis and not being restricted to suburbs in the property magazines’ universe. Years down the track my suburb choice still had good demand. We had several potential tenants expressing interest before the development was even completed, so there was clearly plenty demand in the area. To be completely fair, the development did go over in terms of timescales, but the fact I had no issues with profitability is testimony to the investment quality and how the downside was still managed. There is never a 'silver bullet' with risk management but build quality, suburb selection, site location all helped to skew risk to the upside, and as an investor, my primary job is to seek investments that allow me to do that."
The wholesale opportunities they marry up with the analysis represent significant value
Prior to finding this valuable service I would spend many hours reading magazine articles and trawling the internet for indications of suitable locations for property investment. Now I can simply wait for the Hotspotcentral research to tell me when and where to target based on their proprietary statistical scoring system and get on with my busy life. In addition, the wholesale opportunities they marry up with the analysis, and the significant value they represent, provides me with piece of mind that risk is reduced and that I am well in front from the onset. [They have] been very friendly and helpful and displayed much integrity in our dealings. I’m looking forward to my next investment with Hotspotcentral.
Dr Harry Seidler
Michael....this is gold for investors...I wish I had heard of you sooner...I would probably be retired by now
Investors only own one property
Investors paying money in after rent
Investors own six or more properties
Source: Corelogic | ATO
Invest from $10,000
Only 2 townhouses remain with Stamp Duty paid.
Annualised Cash Return
Discount to market value
Annualised Cash Return
Discount to market value
Annualised Cash Return
Discount on completion
Discount on completion
Michael Fuller, founder of Hotspotcentral has written extensively about the armchair co-developmemt strategy. His research techniques and proprietary investment algorithms have been used by thousands of investors and industry experts alike.
Boomtown grabs millions of data points from multiple public sources and generates 8 leading indicators of supply and demand
Each indicator is compared to known benchmarks to calculate the ratio of demand to supply for units and houses in 15,000 suburbs. That's 30,000 micro property markets measured in seconds.
The DSR BoomScore™generated rates each suburb (houses and units) from 0 to 48:
Hotspotcentral's Top 50 suburbs for 2014 selected using the DSR BoomScore™ averaged 40.97% against a market average of 12%. That's a staggering 26% difference. See More
*based on an independent audit by the Data Group.
Join over 13,970 investors who use Boomtown and our insights to pick their own investment hotspots with scientific accuracy.
Boomtown is a web app which works on all browsers both mobile and desktop: boomapp.com.au
All investors should do their own due diligence.
CASH-ONLY INVESTOR - Minimum $10,000 in cash or funds in SMSF. Cash-only investors do not retain a property on completion and can expect deals targeting 20%+ returns on their cash invested.
RETAIN A PROPERTY AT COST - $150,000 in cash or SMSF. Ability to obtain holding finance for the completed property. Your profit might be sufficient to serve as a holding deposit after you have retrieved your original $150,000 investment
No. We encourage developers to present projects countrywide. We have the ability to check over 15,000 suburbs using our data algorithms and therefore can pick an opportunity on the facts and data alone. We currently focus on Queensland due to the higher degree of certainty around development approvals and the overall profit potential of the sites seen recently.
This can change at any time.
Our fees are fully disclosed in the relevant Financial Services Guide which must be read in conjunction with the formal offer documents.
Whether you wish to retain a property at cost price or receive only cash returns on your investment, it is important you get yourself 'market-ready'.
Market ready means you are financially ready to act (as confirmed by a Hotspotcentral approved advisor at no cost to you) and you are familiar with our research model and the investment structure.
You are encouraged to read emails from us, watch webinars and videos and talk with us directly.
It's a process of education so that you are equipped to make an informed decision based on facts alone.
Because you and our investors help solve three problems.
You provide seed equity to get a project started
Most mid-size developers use their own personal balance sheet to raise funds to purchase the development site, pay council fees and professional consultant fees to prepare the site and get council approvals.
The banks then lend the balance of funds - usually about 70% of the total costs.
On a $5-million project, the developer would have to inject $1.5-million in cash ('seed capital').
On three projects, this would be $4.5-million, and this can limit the number of projects a developer is able to do under their own balance sheet.
Developers that have maxed out their personal capacity for project funding approach Hotspotcentral with a profitable project they would not otherwise undertake.
As a result, they are happy to share a significant portion of the profit on very favourable terms in exchange for your equity.
Your seed equity and off-the-plan contract (if retaining a property) helps the developer get project funding from the banks.
In addition to hard cash, the developer also needs to provide a certain level of pre-sales before the banks will lend the 70% difference. Selling property off the plan is very expensive, with commissions ranging between 5-10% of the end sales price.
Hotspotcentral solves this problem.
We provide these 'pooled funds' from our investors and the pre-sale agreement from our investors who wish to retain a completed property so that (1) the project can start, (2) the banks are willing to provide finance, and (3) the developer can go on to do more projects.
In return, the developer gifts the equity on the units that are sold to Hotspotcentral investors at cost price under this model, and takes the profit on the retail sales of the remaining units.
It's a very fair exchange if structured properly with the right developer.
I often challenge some of our subscribers to approach developers directly - to offer a developer their cash and a pre-sale.
These investors quickly find that most developers prefer not to deal with one individual and so this model only works when there are sufficient investors offering their capital as a group.
We solve this problem for both individual investors and developers by bringing the 'crowd' - our group of educated investors - to a project we deem suitable (in terms of location, project quality and risk and reward/profit).
Having a group of 'market ready' investors means the developer can act quickly (for example, settle on a good site quickly) and continue with a project where there would otherwise be a gap in the funding.
Crowdfunding reduces the cost of raising this seed capital which means anyone with $10,000 in cash or SMSF can access property development profits that have typically only been available to developers and wealthy investors.
This depends on the project duration. Usually only 12-18 months. Some projects have shorter timeframes.
We keep our investors up to date with regular site reports, including videos and ongoing commentary. It's fun and informative seeing a piece of dirt morph into properties that will be the home to someone soon - especially if it is from the comfort of your own armchair!
CASH ONLY INVESTORS
For cash only investors we target returns of 20% or more.
Yes, past projects in our network have returned as much as 35%, 58.7% and considerably more. But we must emphasise, each project comes with its own risks and therefore what is really important is the 'risk-adjusted return'.
If you are comfortable with a targeted return of 20% or more, then we want to work with you.
Anything higher is 'cream' and, while it can be realised, should not be an expectation.
If you want more than 20%, then the casino might be your best bet. Of course, the risk adjusted return at the casino would probably be about -100%.
ARMCHAIR DEVELOPER PARTNERS
Our Armchair Developer Partners know we target discounts to market value for completed properties of 15-25% depending on the quality of the location. This is usually a 50% or more annualised return on cash invested.
As our investors are aware, we also aim to make the property cash flow neutral or better after retrieving the original investment. This means any future capital growth returns are infinite on capital invested.
We seek balance between upfront discount, return on equity, rental yield and future capital growth potential.
Hotspotcentral has pioneered two areas in the property investment industry:
Algorithmic research - our Boomtown research tool was the first web application in Australia to harness the power of algorithm trained to make sense of most of the property stats across various sources including the leading portals and third party data suppliers. It has enabled us to cherry-pick high growth areas ranked across all 15,000+ suburbs in Australia and has subsequently been proven to beat the predictions of the industry experts quoted in the property media.
Armchair Development - although this term is now widely used, we were one of the first to introduce this model of investing over five years ago.
Other providers have tried but success comes down to the correct legal and compliance structures, the right projects and people plugged into these projects, and, of course, the right locations.
Getting this mix right is no easy feat and something we continue to refine at the project level.
Our algorithms for picking the right location and project have been fine-tuned over the years and ensure a high degree of objectivity in the selection process.
We are not tied to any one developer so they have to earn our repeat business one project at a time.
If you want guaranteed returns, leave your money in the bank.
What we aim for are returns based on hard facts and certain underlying guarantees.
For example, in some offers the developer has guaranteed the build costs. They have also provided commercial valuations from reputable, conservative and independent valuers. This ensures the end price less the discounted price is very realistic.
In the past, we have seen the discount (or profit) eroded when developers have made mistakes (or worse) and passed these onto the investor.
However, from constant feedback and experience over the years, we have influenced the evolution of this model to provide better investor protection.
It works both ways. Our clients are also expected to manage their finances so that they can settle on the property on completion. If not, they might forgo their profit as we on-sell their share (and therefore their right to a discounted property) when it becomes apparent they are in financial difficulty.
The scenario above does not happen often as we can give some assurances to the veracity of the research and offer, likewise our developer partners want to work with financially qualified investors who understand this investment model well.
They are simply replaced.
The banks are the biggest 'investors' in these projects. This means they add another level of due diligence in addition to Hotspotcentral's due diligence, the Australian Financial Services License (AFSL) holders due diligence and your due diligence.
It also means the banks want to know the reputation of the builder and developer and what risk mitigation is in place for these sorts of events.
Hotspotcentral has been involved in two projects where the builders did go bust. It's unpleasant in that is causes delays, and in one case a hit on profits.
But our investors understood it was not the norm and could not have been foreseen, and went on to invest in subsequent Hotspotcentral projects.
If this is 'too risky' for you, then money in the bank is your best bet.
This depends on the location, the target market for the end property, and the price bracket of the property.
We always ask the developer for an 'up-spec' as a point of difference. So, for example, where split cycle air-conditioning is the norm for properties in the area, we ask for ducted air-conditioning.
When competing for tenants - even in an area with low vacancy rates - it's important for our properties to stand out from the rest to ensure they are always in demand despite what the market is doing.
This depends on whether you choose to invest and retain a property on completion or not (i.e. are you a cash only investor or an investor-developer?). It also depends on your budget.
Armchair Investor-Developers, with $150,000 and more to invest, can take advantage of off-market cost price investments in high-growth locations. We source deals at 15-25% discount to bank valuation for our exclusive group of investors. This means they are highly likely to be cash flow positive (or at worst case neutral) after extracting the original deposit when the property is completed.
Please see the property investment report for a cash flow forecast to see how this works.
Unlike other value adding strategies like house-and-land or renovations, you do not have to pay interest on the construction funding.
Interest is capitalised and paid out by the project as per the feasibility in the official offer documents.
If you do not have available cash and decide to obtain a bank loan in order to provide your initial deposit to take up an investment opportunity, then you will need to pay your bank interest on your loan and that is between you and your bank. As projects can take 12-18 months to complete, you will need to factor this interest into your calculations to make sure the project is still feasible for you.
Hotspotcentral is limited to 20-30 (depending on project specifics) discounted property deals annually via our Armchair Developer Partnership.
This is a regulatory limitation and our preference as a boutique operation. We might scale up our licensing in the future but for years this has been a self-imposed limitation. Quality not quantity.
In time, we envisage these offers will be entirely taken up by existing repeat investors and closed to our broader subscriber list.
The cash only investment offers are only limited by the number of good projects that meet our strict benchmarks.