Good advice - probably not for this thread, but how do i pick up on this (independent building report?)? I've never even tried too look for some of the things you mentioned and taken it for granted.
All advice is general, I am by no means the smartest or most construction professional in the world. The answer is largely based on my own opinion and understanding of the industry from a junior.
Generally, an independent building report won't pick up on the issues that I mentioned as most of them are concealed. Waterproofing is covered by tiles, foundations are covered by structure, reinforcement is covered by concrete.
If the apartments have been around for 2-3 years you can read the strata report and the minutes of the meetings to see if issues have been identified, but if you're trying to buy something OTP, the only thing you can try and rely on is the builder's reputation. I prefer larger tier 2 type builders who have a track record of completing large commercial and residential projects.
My reasoning for preferring a builder who has a proven track record in both commercial and residential is due to the more rigorous requirements placed by commercial construction on both developer and builder, and the different ways that commercial vs. residential developments operate.
When referring to large commercial developments, I mean projects with values upwards of $20M and ideally, built for well known developers (Abacus, Goodman, Australand, etc.).These large and experienced developers often retain control of the asset once it is constructed, meaning they are more interested in the long term prospects of the property. Not only that, but in order to attract good tenants, a developer will often have to have a good reputation, or at least be well known.
This means it is in their best interest to ensure that their asset is of a high quality AND that someone else is contractually liable if there are issues with the building.
These developers seek professional advice about obtaining their new asset and engage professional, experienced consultants and professionals to protect their interests during the construction process which generally means there is more rigorous standards applied to the construction of the building. Additionally, people within these companies often have relationships with other development companies and occasionally discuss projects.
Thus, from a builders perspective in these commercial projects, contracts are more onerous, standards are higher, and thus risk is greater. Which scares many crappy/dodgy builders off and often means that only well established, intelligent builders are able to compete long term in these types of areas. If you're not smart enough, you try and cut corners, make silly mistakes and then get ground in to the dust.
Contrast this to a residential development, where the value from the project is by the developer generally shortly after a project is completed. They sell as many apartments OTP as possible and rarely (in my experience) do they hold any significant number of properties. Which means that the developer is not necessarily as concerned about the long term prospects of the property, but is more motivated by the immediate returns.
If they can get lower construction costs, they can either lower their sale price or obtain more profit. Additionally, these residential developers don't necessarily need to rely on long term reputation to sell their products. The buyers they are dealing with are less sophisticated and more emotional than buyers/tenants in a commercial deal. They're more likely to be motivated by beautiful brochures and marketing material plus some shiny fittings, and less likely to be aware of potential issues.
Thus, a developer can maximise their own profit by choosing the cheapest builder. So long as the builder is quick, he does not necessarily need to be an amazing builder. Because, as discussed, the residential developer will typically want their returns now, and are not as concerned with long term prospects.
Once they've been sold, the apartments are owned by a diverse group of people, generally unified under a strata agreement but still a collection of people who aren't particularly learned in legal procedures. They can maybe complain to 5-10 people about how the build quality of their apartment is shocking, but often don't and even then, it's only a small pool.
TL;DR
Rely on reputation. Builders who build lots of large commercial projects as well as residential projects are more likely to be better builders than those who only rely on residential projects. This is because they are held to a higher standard by commercial developers, rather than residential developers.
Apologies if this doesn't make a lot of sense, I probably need to go back to year 8 English and learn how to write an argument well!
some sweeping statements...What type of investments do you think are sound then?
