Analyse this. Units why??Thanks for all the replys

[WebBoard]

From: Jack Moro


Hi night owls,

Please help make sense of my following observations.

I have been considering buying an unit I.P
in central Boronia Melbourne.

Recent shopping around indicates prices as such,

New, construction complete, 2Brm 170K

One year old 2 Brm 150K

The rent for each is generally the same

Why is there a 20K loss of value in one year??

There seems to be no reason for the 20K loss in value other than the Stamp duty savings if bought off plan and the regular depreciation of building and fixtures
for that first year

My questions are?

1. Would this account for the 20K loss of value in one year

2. Where is the capital gain in units

3. Do you get an individual title with a unit

4. What makes units a good or bad investment

5. My sums show the one year old unit a better buy for I.P is this generally the case
(I prefer not to buy off plan or is this a silly phobia)

6. Why are units so dear e.g small land and building compared to house.

7. Any advice on units as I.Ps please, any pitfalls to beware of.

Please help me out with this as I am ready to buy e.g finance soughted accountant o.k etc

Cheers
Jack

 

[WebBoard]

Analyse this. Units why??

Reply: 1
From: Michael Colletti


Hi there Jack , you certainly have many questions regarding units and their true value. I have just settled on a unit in Carlton where as you would know prices vary from place to place what i did to find a rough guide to wether it was worth my while to buy in that area was go to the council and request under the freedom of information the SVandLV of surrounding property's for the last ten years giving me a basis for capital growth within the area( you may be surprised at what this shows up) As for your other questions , units make a good investment when an area is becoming over crowded and the price of houses/land are beyond the average home buyer. If you buy off the plan i suggest you do your research into the background of the builder.
Hope some of this helps.

 

[GoAnna!]

Analyse this. Units why??

Reply: 1.1
From: GoAnna !


When you buy a new apartment (house, apartment whatever)part of what you are paying for is its "newness". Just think of a new car compared to a second hand car even six months old. Naturally this "newness" rubs off over time. And this "loss of newness" will often detract from any growth you are experiencing. In the example you have given it has created a negative growth effect.

I would have thought that houses were still reasonably affordable in Boronia. Have you considered looking at them? Or at even older units?

Tax depreciation is great if it comes as part of the package but the deal needs to be good before the tax advantages are looked at in my opinion.

Anna

 

[Rolf Latham]

Analyse this. Units why??

Reply: 1.1.1
From: Rolf Latham


Anna

Good point about the tax bit.

AS I have read on this forum and have used this line often:

"The winner is not the person with the biggest tax cheque, but the one with the biggest bag of money"

Ta

Rolf

 

[WebBoard]

Analyse this. Units why??

Reply: 1.1.1.1
From: Gavin J


You need to think too, Jack, that Boronia is a long way out of the city....

Most of the intensive research I've been doing over the past few weeks has all pointed towards inner-city properties being able to sustain higher growth for longer periods. This is partly due to the fact that there's not a lot of empty land in the inner 'burbs as opposed to Boronia. (I should know - I lived in Boronia for 20+ years.)

I don't think that there's enough demand for apartment-style lifestyles out that far yet - that type of property doesn't fit the area.

The HOUSE I used to live in (3bed, 1bth, larger-than-average block) sold for around $125k (last year). That is less than the 3.8 squares apartment(extremely tiny, no yard/balcony, 1 parking spot) that's going up for auction next door to where I live now in Elwood for over $150k !!!

So you see, for an equivalent price, you should be able to secure at least a house + land in Boronia.

Comments please!

 

[Kristine..]

Analyse this. Units why??

Reply: 1.1.1.1.1
From: Kristine .


Hello

Good reply, Anna and Rolf

Keep in mind the 10% GST included in the cost of any new building

Individual title - yes, almost always, under the Subdivisions Act 1988

Comments on density, lifestyle and affordability of other means of housing are good points, but there will always be smaller/older/different families who would prefer a unit to a 3BR with a large block of land. Boronia is ageing, too.

One year old is good, but so is buying off the plan if the whole deal 'stacks up'. There are no hard and fast rules, assess each property on its own merit.

My personal opinion is that for investment properties, it is the point of difference that can make the difference.

A lot of units together are like logs in a raft - they set their own value. Individual houses in a street can differ markedly in value. It is their point of difference.

A group of units that are unlike other unit developments in the area, or a unit in a development where they are all different to each other, is more like a mini suburb than a unit development, and thus the value of each property is more likely to be judged on its own merits.

I 'know' the unit to which you refer. The builder has a good reputation, but tends to be fixed on price. And good luck to him. But as the buyer/investor, the rate on return is more important to you, so keep shopping around until you feel comfortable with the whole deal.

Good luck

Kristine

 

[Kristine..]

Analyse this. Units why??

Reply: 1.1.1.1.1.1
From: Kristine .


PS
So, Jack, as a previous Body Corporate Manager in the Bayswater/Boronia area, let me say that there is a strong demand for alternative housing in the area, including rental of units of all shapes and sizes.

Why not enquire with some of the larger agents as to their vacancy rates with units? You may be surprised at how low the vacancy rates are.

Kristine

 

[WebBoard]

Analyse this. Units why??

Reply: 1.1.1.1.1.1.1
From: Jack Moro


Thanks to all who replied to my post.

After re-reading segments of Jan's book (building wealth - Which residential property?) I will probably go for the unit but one which is a couple of years old
to avoid any negative growth. And reduce maintenance cost. Low mtc is important to me.

I feel comfortable with this and the figures do stack up to almost neutrally geared, though this is taking into account tax benefits by the time these are reduced I believe the rent will have increased to cover the reduced tax benefits.

Gavin mentioned a comparison with a property in Elwood. Gavin, I take your point but I am a newbie and am unfamiliar with the Elwoood and what represents good value so I will stick with Jans point of buying within 15km radius of where you live. Though I realize this may be at the expense of some capital growth.

Micheal you mentioned LV and SV from your council unsure what this is. I know I can inspect sales register at council which only goes back about a year or so could someone please elaborate or detail where you research property values, sales from previous years.

Kristine I feel an affinity with your points regarding Boronia especially after the recent infrastructure improvements.

What impact do you believe the Scoresby Freeway will have on Boronia, Ringwood etc effectively bringing the City within half an hour by car.

Thanks again
Jack