Aria - Melbourne Residence South brisbane OTP

First time Poster & short time reader.

I have been dealing with an investment company who have led me to a 2 x 1 + Carpark 60m^2 Internal + 8m^2 Balcony in the new Aria Melbourne Residence in 109 Melbourne Street, South Brisbane for $579k

The reasons they gave me for why this is a great investment:

* Assures me it is almost certain that it will gain short term capital growth.
* Better quality than previously built and other apartments under construction for the price
* Aria have an immaculate record.
* Apartments being completed now have returned a very substantial CG.

I agree Brisbane looks like a great place to buy. I am worried with the huge supply of apartments in South Brisbane that the time for short term CG for OTP apartments is too late with the possibility of a higher supply than demand for the short term. My concern is that he comes across like he isn't a salesman, which probably means he is a very good salesman. He also didn't want to share his personal portfolio.

I have no doubt that there will be long term growth but for someone like me buying their first investment property with solid income, I am after quick CG to expand my portfolio as early as I can.

Can I please have some easy to understand reasons for why this may or may not be a bad investment?

Thanks in advance.
 
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* Assures me it is almost certain that it will gain short term capital growth.

Who assures you??

* Better quality than previously built and other apartments under construction for the price

How do you know? It hasn't been built yet....

* Aria have an immaculate record.

For what? Makimg big profits? Safe workplace?

* Apartments being completed now have returned a very substantial CG.

Evidence? What is the definition of "very substantial"?
Who has it returned the CG to? It might be to the developer!!


The Y-man
 
My concern is that he comes across like he isn't a salesman, which probably means he is a very good salesman.
...

I am after quick CG to expand my portfolio as early as I can.

Trust your instincts.

OTP rarely delivers quick CG to the buyer. It benefits the seller greatly, because you are paying up to 30% over the going rate of established properties.

The Y-man
 
To Y-Man

"Who assures you??"

The investor.


"How do you know? It hasn't been built yet...."

I agree, It's more expensive than Mirvac around the corner. Not sure on the size of mirvac.

"For what? Makimg big profits? Safe workplace?"

For quality of the build


" Evidence? What is the definition of "very substantial"?
Who has it returned the CG to? It might be to the developer!!"

From what I can see the 2 bed OTP apartments bought for high 400k 2 years ago have gone up a fair bit.
 
Trust your instincts.

OTP rarely delivers quick CG to the buyer. It benefits the seller greatly, because you are paying up to 30% over the going rate of established properties.

The Y-man


He told me the established apartments in the area are not comparable because their quality is much lower and age much older.

Got some ammunition I can throw back at him?
 
To Y-Man

"Who assures you??"

The investor.

:confused: Which investor assures you will have growth?



"For what? Makimg big profits? Safe workplace?"

For quality of the build

In that case, need evidence of past projects, body corp costs (indicates how much had to be spent on getting things right etc

" Evidence? What is the definition of "very substantial"?
Who has it returned the CG to? It might be to the developer!!"

From what I can see the 2 bed OTP apartments bought for high 400k 2 years ago have gone up a fair bit.

Yes, but how much has a 10 year old unit of similar price gone up by in another part of town?

The Y-man
 
:confused: Which investor assures you will have growth?
The Y-man

Sorry, the companies investment strategist or salesman is telling me it's the best move for a 1st investment.

In that case, need evidence of past projects, body corp costs (indicates how much had to be spent on getting things right etc
The Y-man

OK Cheers.

Yes, but how much has a 10 year old unit of similar price gone up by in another part of town?

The Y-man

What's the best way of finding out this data?
 
He told me the established apartments in the area are not comparable because their quality is much lower and age much older.

Got some ammunition I can throw back at him?

No. Do not engage and walk away.

Look, I don't want to put you off purchasing (well, actually I do but....). It's just that of the 11 investment properties we have bought to date, the worst deal by far was a similarly fantastic sounding OTP deal.... and that was with a great developer, a good builder (Multiplex), etc etc. In the end we sold it to cut our losses, because the holding costs were going to be so big (similar sized project to what you are looking at).

You might want to ask the estimates on the outgoing.

I tell people to double it.

A 20 storey building with 180 units means that almost no consensus can be reached by the body corp quickly.

The lifts alone can cost several million to maintain and recable over a 10 year period.

The place has a rooft top pool - imagine when it leaks....

The price of maintaiing commercial grade aircon in a building that size is thousands of dollars per month.... as is keeping all the fire and security systems.

180 units worth of people going through the garage means the remote door will break down almost every 2 weeks.

The Y-man
 
To Y-Man

I did get an expense report. Good to know it can be BS.

Thanks for your help. I am thinking a house in a suburb North of brisbane might be a better option.
 
Be careful

First time Poster & short time reader.

I have been dealing with an investment company who have led me to a 2 x 1 + Carpark 60m^2 Internal + 8m^2 Balcony in the new Aria Melbourne Residence in 109 Melbourne Street, South Brisbane for $579k.

That's >$9,500 /sqm on internal which seems crazy for a 2B OTP. You can buy 1B OTP for less than that and generally their /sqm rates are higher. Is there something special about this apartment?

The reasons they gave me for why this is a great investment:

* Assures me it is almost certain that it will gain short term capital growth.
No one can honestly make that assurance.

* Better quality than previously built and other apartments under construction for the price
Ask them what they mean specifically. Nothing against the developer, I'm not suggesting it won't be a good quality build. All you have to go on is what is in the contract, what is in the disclosure statement and past projects by the same developer/builder.

* Aria have an immaculate record.
See above comment.

* Apartments being completed now have returned a very substantial CG.
Ask for some example buildings and then subscribe to one of the online databases to check actual resales for yourself. If the advice is based on bank valuations instead of actual resales ask to see the valuation reports.

I agree Brisbane looks like a great place to buy. I am worried with the huge supply of apartments in South Brisbane that the time for short term CG for OTP apartments is too late with the possibility of a higher supply than demand for the short term. My concern is that he comes across like he isn't a salesman, which probably means he is a very good salesman. He also didn't want to share his personal portfolio.
You are right to be considering the supply side of the equation. As well as South Brisbane/Southbank you have a large number of apartments in West End, Kangaroo Point and Woolloongabba as well.

Are you trying to flip the property or are you hoping for serious CG in the 2-3 years post settlement?

I have no doubt that there will be long term growth but for someone like me buying their first investment property with solid income, I am after quick CG to expand my portfolio as early as I can.
Consider your exit strategy. What is going to attract a future owner occupier to your apartment? What about a future investor?

Can I please have some easy to understand reasons for why this may or may not be a bad investment?

1) Benchmark the cost per square metre against other projects
2) Reduce rent appraisals by at least 10% and redo the modelling. I see on the Northside similar 2B units are renting for high 400 - low 500 a week.
3) Do your CG forecast on 2-3% pa and see if it still stacks up.
4) By all means pay the holding deposit to see the contract and disclosure statement. Look for specifics that you have been told about.
5) I agree with the earlier comments about the potential for a dysfunctional OC and the possibility of a 100% increase in BC costs.
6) To me OTP makes sense if you can buy something that has a difference that means you can differentiate when you are trying to rent and trying to sell. Otherwise you are just one of many generic apartments that will only be differentiated by the weekly rent in the eyes of a tenant.
7) Ask the investment company to disclose their commission/earnings on the transaction. When I did this I found that the total earning for the investment company was ~6.5% of which 2.5% was sales commission and the rest "marketing costs". They may say that these earnings are compensation for their due diligence in selecting properties they are willing to recommend. I don't buy it.

Thanks in advance.
 
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