Apartment Block Finance

Hi there,

Do banks do (now or in the past) residential lends eg. at 80-95% LVR on properties like these below?

http://www.realestate.com.au/cgi-bi...r=&cc=&c=28906332&s=vic&snf=rbs&tm=1232795364

http://www.realestate.com.au/cgi-bi...r=&cc=&c=28906332&s=vic&snf=rbs&tm=1232795364

Or, are they only done at commercial LVR's and interest rates?

Thanks .

A 3% yield? Hee hee.

The one that is strata'ed you should be able to take to two separate banks and get normal residential loans. Unsure on LVR as the market is changing so quickly. I had no trouble with 80% but was not seeking anything higher.

For a single titled multi dwellings the cut off is usually 4 so that would impact the LVR on the other property. Although termed commercial the interest rates would still likely be residential type rates but start up costs likely to be much higher and perhaps different loans conditions such as reviews etc.

Hiya

What GA said

Some lenders will do 6 or more on one title to 80 % resi finance terms.

ta
rolf

Ooops forgot one thing. Vendor may require "heads of agreement" if you go with two banks as they don't want you to settle half only and walk away...... (now that would make for fun body corporate meetings)

JIT my gut feeling is telling me that you used those links for illustrative purposes only.

I have seen you on this forum since i joined and have respect for your investment savviness.

What sought of gross ylds are you seeing out there at the moment for whole blocks of apartments?

appreciate your views.

Private Sale - $3.2 M RETURNS $110,000 GROSS.

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Holy smokes JIT....you must have one hell of a job with a bunch of free cashflow if you are looking at paying the Vendor anywhere near that. I agree with chilliaa.....you wouldn't chase this highly inflated showboat.


110K gross less ;

CR...........6 K
WR..........5 K
LT..........20 K
Ins...........3 K
Maint........8 K

Nett rent of ~ 68 K p.a. Call it 75 K p.a. cos I'm feeling generous.


Interest cost of 3.2 * 0.07 = 224 K p.a.


You only need to find 224 - 75 = ~ 150 K p.a. Easy peasy.

MAKE US AN OFFER!!

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No wurries. With a nett rental of 75 K, how does 800 K grab ya ??

Givvus a 75% discount to the asking price and you've maybe got yourself a deal. But at 800K, the Sellers will need to sweeten the deal a bit by also throwing in a case of Grange to tempt me to sign up.

Next.

I haven't run the numbers but assume he's considering spinning them out to OO / smaller investors.

Thanks for the replies.

Yes, the properties above were just examples, which at face value looking at the basic numbers involved aren't very appealing...thanks TPFKAD!

I'm not too sure what the yields are generally like for this type of property.

I am a tad ahead of myself now...just doing some planning of some possibilities/options for me in the next 3-5 years.

As my JOB income and equity increase, I'm thinking that instead of continuing to buy multiple sub-500k/median-priced IP's...to up my purchase price points instead.

Eg. 2 X $1MM houses vs. 1 X $2MM multi-unit apartment block.

The 2 X $1MM option would mean less tenants, but vacancy would hurt more, yield may be less, but may have development potential.

The 1 X $2MM option would mean more tenants, less vacancy pain, perhaps greater yield, with renovation potential...and all on one manageable site.

Growth could be similar over a long time frame and with good IP selection.

Anyway, it's just a pipedream dilemma at present!

Hi JIT,

the type of yields for these properties would obviously depend on location. Less for the more espensive inner suburbs and more as you move out.

That Bentleigh one sold in mid-2006 for 1.3 M. I was at the auction out of curiosity as I always wanted a six-pack or similar in the mix. It was more a learning attendance for me.

I did end up buying later that year (in Sydney to spread the land tax love around) on an initial 5.8 % yield. It's now approaching 7 % and with depreciation (and rent rises) is cash flow positive.

Units/flats/apartments will give a better yield than houses. I prefer owning all of them so value add is consistent and no squabbling with body corps etc., but that's just me.

Also negotiate a leaner PM fee as they have economy of scale when dealing with inspections and matters of a generic nature relating to the entire property, etc.

Considering most of my holdings are houses on (development potential) land and one comm at this stage, I thought it prudent for my portfolio to have some units in the stable to cater to the reducing household size demographic.

If you are looking in Melbourne, say 10-15/20 km radius, I wouldn't touch anything less than 6 % initial yield. The further you go out the higher that figure should be.

Be careful that if they are in one line, you will find it hard to secure resi LVR's.

I have a weakness for multiple dwellings.

Usually available at discount compared to comparible single dwelling.

It means a much higher income or the land size say compared to houses.

Capital growth higher from my experience as each dwelling increases and that is multiplied.

Rent increase time is lovely. 8 apartments might mean $160 rental increase. You would struggle to get that increase through on a single house.

Vacancies cause little or no pain.

I can plan end of lease dates so that I am not competing myself at letting time.

PM fees are cheaper as player said due to economies of scale.

I only need to speak to one PM which makes holding more ips more doable.

I don't need to discuss improvements etc with anyone else and am free to upgrade the block inside and out whenever I want.

Control Control Control !!

JIT said:

The 1 X $2MM option would mean more tenants, less vacancy pain, perhaps greater yield, with renovation potential...and all on one manageable site.

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Just because its got 6 units on it - doesnt mean you cant flatten it.

GoAnna! said:

I have a weakness for multiple dwellings.

Usually available at discount compared to comparible single dwelling.

It means a much higher income or the land size say compared to houses.

Capital growth higher from my experience as each dwelling increases and that is multiplied.

Rent increase time is lovely. 8 apartments might mean $160 rental increase. You would struggle to get that increase through on a single house.

Vacancies cause little or no pain.

I can plan end of lease dates so that I am not competing myself at letting time.

PM fees are cheaper as player said due to economies of scale.

I only need to speak to one PM which makes holding more ips more doable.

I don't need to discuss improvements etc with anyone else and am free to upgrade the block inside and out whenever I want.

Control Control Control !!

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I can see your point, but wouldn't this depend on the area,

a few of the suburbs I haev been looking at only have houses, and the suburbs next to it, have a mixture of houses and units, probably more houses for the one I am referring to.

the houses have land component with crappy houses, while the units and town houses have smaller land with generally newer or very new houses, if the suburb was primarily young families and its on the cheaper side, wouldn't having the land component be a much better choice, I know its a case by case scenario, but for suburbs with a mixture with similar prices, I have been looking at houses only........

Id like to hear your take on it

Player said:

That Bentleigh one sold in mid-2006 for 1.3 M. I was at the auction out of curiosity as I always wanted a six-pack or similar in the mix. It was more a learning attendance for me.

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Interesting stuff, 1.3 M to 3.2 M (asking price) in 2.5 years!

Player said:

Units/flats/apartments will give a better yield than houses. I prefer owning all of them so value add is consistent and no squabbling with body corps etc., but that's just me.

Also negotiate a leaner PM fee as they have economy of scale when dealing with inspections and matters of a generic nature relating to the entire property, etc.

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Yes, I agree.

GoAnna! said:

I have a weakness for multiple dwellings.

Usually available at discount compared to comparible single dwelling.

It means a much higher income or the land size say compared to houses.

Capital growth higher from my experience as each dwelling increases and that is multiplied.

Rent increase time is lovely. 8 apartments might mean $160 rental increase. You would struggle to get that increase through on a single house.

Vacancies cause little or no pain.

I can plan end of lease dates so that I am not competing myself at letting time.

PM fees are cheaper as player said due to economies of scale.

I only need to speak to one PM which makes holding more ips more doable.

I don't need to discuss improvements etc with anyone else and am free to upgrade the block inside and out whenever I want.

Control Control Control !!

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Very well said, sounds like a great strategy, and one which I would like to emulate, hence this thread!

JIT said:

Very well said, sounds like a great strategy, and one which I would like to emulate, hence this thread!

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Bentleigh has been a well sought after area for a few years now. The Centre Road shopping strip has grown unbelievably from 10-15 years ago. The Jewish community have a larger presence now due to prices in the Caulfield South area being so high. Anything highway side of the station is a bonus (which this was).
Speaking of stations, this is the start of Zone 1 for memory which is attractice also.

I should also hasten to add, those Bentleigh units were given a very nice make over. I can't remember if they were strata'd at the time of initial unrenovated sale back in 2006.

Nice precinct too, near Allnut Park and the walking/cycling trail, shops, cafe's Zone 1 train, buses up Centre Road, etc....., but yeah over 3 M for 6 doors there is a bit rich.

Hi Jit

After the flats were renovated they were put on the market for private sale @ $500k +
for 2 BR. from memory, none were sold.

The block was then put on the market @ $3.6m. now down to $3.2m, way over priced.

Cheers

Pete

Property Meister said:

I can see your point, but wouldn't this depend on the area,

a few of the suburbs I haev been looking at only have houses, and the suburbs next to it, have a mixture of houses and units, probably more houses for the one I am referring to.

the houses have land component with crappy houses, while the units and town houses have smaller land with generally newer or very new houses, if the suburb was primarily young families and its on the cheaper side, wouldn't having the land component be a much better choice, I know its a case by case scenario, but for suburbs with a mixture with similar prices, I have been looking at houses only........

Id like to hear your take on it

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I am not in any way suggesting it suits every suburb, every investor, at every point in time. In depends upon the time of the cycle, the area, the potential in the property, rental yields, strata'ed or not etc etc.

The land tax on those two properties would very quickly eat you alive. Had a similar property in Brighton heaps of land and within a few short years the rents were gobbled up by the land tax.