Advice needed ASAP! Please and Thankyou :)

[Compleks]

I would just like to get a few opinions on this property.
I would be buying this as a place for me to live for probably the next 3-5 years and then look at renting it out.
(currently leased for $400pw)

http://www.realestate.com.au/property-apartment-vic-st+kilda-114182575

rates - $708
water - $162
body corp - $2,268

The property was passed in at auction a week or so ago. I inspected today and the agent has had an offer already, but giving me a chance to make my own offer.

This is on the upper end of my budget. I love the location and the apartment is pretty decent as well.
Unlike the other properties I have looked at I don't see much potential for adding value. But I would like to know if this newer style apartment still has potential for decent capital growth. I believe it would be quite easy to tenant, but probably attract a more short term stayer.

Any thoughts or input would be great, as I have less than a day before I will need to pass or make an offer.

Thanks everyone!

 

[china]

I would just like to get a few opinions on this property.
I would be buying this as a place for me to live for probably the next 3-5 years and then look at renting it out.
(currently leased for $400pw)

http://www.realestate.com.au/buy?messagesUID=04228e3c-7113-41a5-bffa-0b3839b8ea0a

rates - $708
water - $162
body corp - $2,268

The property was passed in at auction a week or so ago. I inspected today and the agent has had an offer already, but giving me a chance to make my own offer.

This is on the upper end of my budget. I love the location and the apartment is pretty decent as well.
Unlike the other properties I have looked at I don't see much potential for adding value. But I would like to know if this newer style apartment still has potential for decent capital growth. I believe it would be quite easy to tenant, but probably attract a more short term stayer.

Any thoughts or input would be great, as I have less than a day before I will need to pass or make an offer.

Thanks everyone!

The link you have given above does not take us to a property, just the search page of realestate.com.au

 

[Paul j F]

Link doesn't work...

That aside, why the time pressure? Seems ironic that so many times you make an offer there is always another offer in place. If you like it and figures add up make an offer based on the figures and one you're happy with and when you're ready. Ignore the other offer if it actually exists.

 

[Bats]

Link doesn't work...

That aside, why the time pressure? Seems ironic that so many times you make an offer there is always another offer in place. If you like it and figures add up make an offer based on the figures and one you're happy with and when you're ready. Ignore the other offer if it actually exists.

My thoughts exactly.

Do you DD, and if it works go for it.

 

[Colin Rice]

Instruct your broker/bank to set your loan up as interest only for 5 years with a linked offset account from the outset and don't pay the principal down rather accumulate savings in your offset account whilst you live there.
This will enable you to claim the max tax deduction on the interest payable once it becomes an investment property. Any decent broker or accountant will be aware of this strategy but it is dangerous to assume decency from my experience.
If you live there for 5 years then get the interest only period reset by approaching your existing bank or refinancing to another. If you don't need the cash in the offset then leave it there and keep building on it until you do.

 

[Compleks]

Late night posting fail...
Here's the real link http://www.realestate.com.au/property-apartment-vic-st+kilda-114182575

Thanks FMS, that is indeed the plan.

Thanks for the advice guys. I'm not letting them rush me really, I told them I would have to pass because I hadn't had time to think it over and they said they would stretch it out another day just to give me a chance. I'm not going to be pressured, but would like to hear some opinions as I haven't looked at these newer apartments before.

Cheers/

 

[Jake Milne]

That is a horribly tiny apartment on a terrible street. You're aware of the type of activity on Grey Street I assume.

 

[Compleks]

That is a horribly tiny apartment on a terrible street. You're aware of the type of activity on Grey Street I assume.

Well aware. I used to work on Grey st, and still work in the area a fair bit (no, not as a hooker).
Personally it doesn't bother me, but obviously that's a consideration if I decide to rent it out down the line. But most of St kilda comes with a bit of a reputation, so it's going to be hard finding anywhere that isn't home to a few hookers/junkies/hoodlems.

It is tiny, but $300/$330k doesn't get you much around there.

One of my concerns is that the original owner bought this off the plan about 3 years ago for $335 (so I was told). The agent said she overpaid, the market was at peak, blah blah blah, but she's making a loss after 3+ years which I assume is cause for some concern? (can't find the actual build date)

Cheers.

 

[Jake Milne]

This apartment block was registered in 2007 and may have been completed later. It was first rented out in 2010 and in three years has been let out 5 times with 159 days out of 1095 days not leased.

The average vacancy over three years for a good apartment is about 45 days.

For Sale 02/08/2013 0
For Rent 28/01/2013 52
For Rent 16/07/2012 58
For Rent 30/10/2010 11
For Rent 04/07/2010 23
For Rent 19/02/2010 15

Personally, I think you'd be better off renting something than buying this apartment. It's a modern dog box on a busy road on one of St Kilda's worst streets.

It has issues with tenants turning over a lot and wouldn't make a good investment for growth either because first home buyers (the only ones aside from investors who would buy this) may have to put 20% down because the apartment is so small.

I can't see this being a profitable investment for you for such a short time span.

 

[mflying]

What is your strategy after 3-5 year???

Let's look at number in details at today's market value!

Purchase price: $340K (let;s assume you secure at that price inc Stamp duty)

Total Interest @5% = $16750
rates - $708
water - $162
body corp - $2,268
Insurance : $800 (Approx)
2 weeks vacancy: $800
PM Fee : $800 (Approx)

Total yearly cost: $22,285


Total Income ($400 pw. rent) = $20800

Approx Yearly loss: $1485

(For simplicity sake i haven't taken any tax credit or dep in to account)

 

[Compleks]

Thanks Jake, I appreciate all the info.
I'm also not sure where they found someone to pay $400 a week, when everything else in the building is advertised at about $315.

I'm in no rush to buy, but have only seen 2 places I liked in about 2 months. This one has appeal because of the location, decent balcony size and the convenience of not requiring any renovations.
Other places I have seen are still around $300-$320k and probably need another $10k of work and updates. I'm trying to maintain as much of my savings as possible so that I can have a deposit for another investment when the time comes.

Thanks again mate, appreciate your time

 

[S.T]

They're getting $400 per week due to it being rented fully furnished.

Have you taken into account the issues with getting finance for such a small property? Without balcony it looks a lot smaller than 50m2.

I found another unit sale in this complex for 340k in May 2010 and 340k again in April 2013. From what you mentioned about the sale price from new, the prospects of capital growth seem terrible.

 

[Compleks]

mflying & simtr - thank you both.

I think if you factored in depreciation then it probably wouldn't cost much to hold if I rented it out in the future. But I guess the real issue is the lack of capital growth.
Not that I would plan to sell anytime soon, but the history of these apartments is obviously pretty bad as Sim pointed out.

All other properties I have seen in the older apartment blocks have increased in value over the last 3-4 years.
What would be the reasons for a newer building such as this having basically NO capital growth?

Thankyou all.

 

[Compleks]

Have you taken into account the issues with getting finance for such a small property? Without balcony it looks a lot smaller than 50m2.

I don't think it's an issue as I have looked at other sub <50m2 apartments. I will confirm with PT_Bear though just to make sure.

 

[The Y-man]

I think if you factored in depreciation then it probably wouldn't cost much to hold if I rented it out in the future.

Compleks - what do you mean by this?

If you live in it, the thing is depreciating with no tax impact.
If you rent it out in the future, there may be very little depreciaiton value left by then... in fact there could be maintenance/repair costs etc

The Y-man

 

[Compleks]

True.
I thought there might still be some depreciation left in 3-5 years. But it's already 4-5 years old. Either way holding costs wouldn't be significant, but that's not really relevant if it isn't increasing in value.

Does anyone know where on the section 32 I can find the actual size of the apartment?

*edit - found the plans, and it's only just over 40m2 (including the balcony)

 

[Compleks]

This apartment block was registered in 2007 and may have been completed later. It was first rented out in 2010 and in three years has been let out 5 times with 159 days out of 1095 days not leased.

I found another unit sale in this complex for 340k in May 2010 and 340k again in April 2013.

Hi Jake and Simtr (or anyone else who can answer).
For future reference, where can I find information like this about specific properties?
Would be very handy when doing my homework next time.

Thanks

 

[Jake Milne]

I have subscriptions to APM and Residex... Reports are about $200ish per property.

 

[S.T]

I use pricefinder, you can however get a suburb report from RPData that I've used in the past, it will show sales of properties within a time frame. I think it's pretty cheap, like $10-20. otherwise chat to your broker, they may be able to run some reports for you if you ask nicely.

 

[Compleks]

I have subscriptions to APM and Residex... Reports are about $200ish per property.

Ahh, okay. That's quite handy.
I think I'm able to get residex reports from my broker which I forgot about.

Cheers Jake.