Ashfield inner-west Meriton complex?

Hi all,

I have been reading a lot of the threads on Somersoft for over a year now and decided to join up. Hello to you all.

For all the inner west fans, I have my eye on a 2 bed in Ashfield in the Meriton complex on Brown St near the station. I went to an inspection on Sat and only 3 people showed up. I'm about to run a strata report and expect no issues, but I wanted your expert view on this complex as opposed to say the 30 yr old low density blocks on the other side of the rail line. In the past 6 months, the low rises walk ups are going around the high 5 to low 6 figures. It?s pretty crazy.

The Meriton I inspected was ok. Needs new carpet, skirtings and paint job. They are asking for 600 for level 2. Probably costs around 550 in 2013 so I guess the agent trying to get current market value for 2014 as it?s the first one in the complex for sale this year. The two bedrooms and bathrooms are very large. It doesn't face the train line which is good but the lounge and balcony is quite small with hardly any sunlight (west facing lounge but sunlight blocked). Both bedrooms have a window facing east away from rail line. The selling point is big bedrooms, big bathrooms, and east facing windows for bedrooms. The bedrooms also don't have common walls so no noise on three of the walls.

I'm a bit confused as to why the low density that is 10 -15 min walk to station is doing so well in demand and not the as much for the high rises. I can only see two high rises in Ashfield; The Esplanade and the Meriton on Brown St. The Esplanade is on the rail line and does not look so clean around the foyer on the street. The Meriton looks well maintained as they have a building manager, etc. Any thoughts?

The only reason I can find is strata; 1300 as proposed to say 600 for low density. Is this much of a big deal really? Most med to high complexes costs this much? Are buyers in Ashfield refusing to pay this amount. I mean in Rhodes, people are happy to be paying this type of strata and it?s twice the distance to the city.

Thanks,
Will.
 
Ahh so naive, "run a strata report and expect no issues"

This is a Meriton project, they are infamous for their poor quality and ever rising strata costs. The other issue that can be a problem is that Meriton offer 5% finance clauses for two years because come settlement the valuations never comes in. I fear for the time when that two years expires and people have to settle and if they can't get the finance they lose the apartment. Meriton won't fire sale them and will retain them but there will instantly be a lot of new apartments looking for tenants which can damage the local rental market.

I'll be honest, I actually have not seen the project you are talking about so take my comments as a general observation that I have seen with other Meriton projects.
 
Thanks, Belvoir, for the reply.

It's not an OTP; it's about 8 - 10 years old now and quality looks ok, so no need to worry about finance and settlement issues. It's not managed by Meriton at the moment. Maybe it was built before Meriton got the bad wrap or before they started building poor quality units.

I just don't like to buy a 30 yr old walk up that is 15 mins from station; sort of beats the purpose of living close to city, and fast transport.

Will.
 
Is this for IP or PPOR?
How big is the complex (how many unit in the same building)?

$1300 could be cheap or expensive due to several things, order strata report will help you.
With the strata report you will find out how much money level in the banks.
Is there any emergency repair, maintenance cost, etc via last AGM meeting.
 
Hi ZachAnSe,

There is approx 177 lots in the complex ranging from 70sqm for 1 bed to 140 sqm for 3 beds. The one I am looking at is about 109 sqm which includes a big 17 sqm car park lot.

I would like to move in as PPOR for at least the first couple of years but it has a lease that expires in June so I can't move straight in and from what I know, if I don't move in on settlement, the place with be subject to CGT later on if I decide to move in then rent out. If I move in on settlement and rent out later for 5 years, then sell, then no CGT. No way to avoid unless I advise the owner I want settlement when lease expires. Not sure what the chances are though.

I will get the strata report tomorrow. Place has a pool, gym and garden area in the middle as well.
 
Hi ZachAnSe,

There is approx 177 lots in the complex ranging from 70sqm for 1 bed to 140 sqm for 3 beds. The one I am looking at is about 109 sqm which includes a big 17 sqm car park lot.

I would like to move in as PPOR for at least the first couple of years but it has a lease that expires in June so I can't move straight in and from what I know, if I don't move in on settlement, the place with be subject to CGT later on if I decide to move in then rent out. If I move in on settlement and rent out later for 5 years, then sell, then no CGT. No way to avoid unless I advise the owner I want settlement when lease expires. Not sure what the chances are though.

I will get the strata report tomorrow. Place has a pool, gym and garden area in the middle as well.

I'm not against or support you, because PPOR is emotional purchase..
Just want to give advise that you don't want to overspend on strata, or other cost. This will affect your cashflow to purchase IP.
 
I went to an inspection on Sat and only 3 people showed up.
Doesn't that tell you something? I'd never advise my clients to buy in there.

In the past 6 months, the low rises walk ups are going around the high 5 to low 6 figures. It?s pretty crazy.
No, it's not crazy, it is just a 10% rise in 1 year - same old, same old.


I'm a bit confused as to why the low density that is 10 -15 min walk to station is doing so well in demand and not the as much for the high rises.
Where do I begin? Low land component in the high rise. No scarcity value in the high rise. No uniqueness in the high rise. If you need to sell in a block of 117 and so do 4 others, what will make yours sell first (apart from dropping the price :() Lifts = high strata.etc etc

The only reason I can find is strata; 1300 as proposed to say 600 for low density. Is this much of a big deal really?
Yes it is a big deal. as a PI, you are paying 3-4 weeks rent every quarter away in strata levies.

Most med to high complexes costs this much? Are buyers in Ashfield refusing to pay this amount.
It is not the norm for Ashfield.

Many of these units are only reselling now at prices simialr to what were being paid 8-9 years ago when the building was being sold OTP.
 
I quickly read Meriton and Ashfield, and thought "bargepole", especially if south of the Railway Line...

I share Belvoir's sentiments. If there are seemingly no issues after 8-10 years, buy a lottery ticket; one of the few Meritons without structural issues. :)

If you've got 550-600 as your budget, I think there are far better options with far better build quality than the one you've seen.

My 0.0002
 
Thanks all.

I wonder if there is a way to tell which Meriton complexes were affected by poor build standards, etc. The one at Ashfield does look ok. They seem to have put the quality finishes in the bathroom and kitchen. For example, the vanity in the bathrooms are of decent size and not like a $100 cheapo job where you can't actually put anything on it.

Will.
 
Read the strata minutes, Will. Go to the strata manager, pay the fee, sit down and read the minutes of the meetings. All of them - put aside a few hours. Or pay someone to do it for you.
Strata minutes are a luxury that buyers of houses don't have available to them.
 
Got the strata report and there has been no issues over the past 5 years in terms of building defects. The guy said he did a report on this building some years ago and there was no issues then as well. He did say there were minor water issues in the first couple of years after it was built but that was a long time ago.

The only concern is that the sinking fund is like 3k and admin fund is 21k. The guy said they sort of use the sinking fund for admin stuff as well and vice versa. There was no need to raise the levies as it sort of gets by every time the funds are topped up each quarter. No special levies are on the horizon as well.

What do you think about 3k in sinking fund; body corporate isn't worried as it gets by, etc and no major defects over the past few years.
 
There are 177 apartments and a total of $24K in the sinking/admin kitty? I bought a flat last year in a walk-up block of 16 and there was that much in the kitty and the bloke who did my strata report described it as the bare minimum. I'm not sure what the convention is, but $24K doesn't sound like much.
 
Got the strata report and there has been no issues over the past 5 years in terms of building defects. The guy said he did a report on this building some years ago and there was no issues then as well. He did say there were minor water issues in the first couple of years after it was built but that was a long time ago.

The only concern is that the sinking fund is like 3k and admin fund is 21k. The guy said they sort of use the sinking fund for admin stuff as well and vice versa. There was no need to raise the levies as it sort of gets by every time the funds are topped up each quarter. No special levies are on the horizon as well.

What do you think about 3k in sinking fund; body corporate isn't worried as it gets by, etc and no major defects over the past few years.

Run, run as far as you can go from this..

Do the maths, $24K for 177 apartments?
 
So I got a respons from the caretaker who is also the agent for the sale;

Strata Levy is collected constantly and equally every quarter. But spendings fluctuate. So sometimes the balance during the year may go up and down. Good thing about a big complex of 17# lots is that any one time spending can be smoothed out. The past 4 financial years, the OC has been spending about $780,000 to $820,000 every year. They didn't try to keep a fat sinking fund, but there hasn't been any serious deficit too.

I knew all of this but what does that mean. They have enough to know it will cover things for the year as there are no major problems on the horizons.

So is the concern all about what if a surprise shows up (200K damage) and there is no cash?
 
They have enough to know it will cover things for the year as there are no major problems on the horizons.

But what about a problem that might be over the horizon?

I was just talking to one of our QSs who used to do sinking fund projections when he worked at another company that did a fair bit of that stuff. When I ran past him the wisdom of a 177 apartment building with $24K in the kitty, he nearly spat out his coffee.

The sinking fund is used for painting, and recarpeting and stuff like that i.e. programmed maintenance, but there should also be a buffer in case there is a big problem. If there aren't funds in the kitty to replace a roof membrane or an elevator or something like that, it means a Special Levy i.e. dragging a one-off payment out of 177 owners.

I own an apartment in a block of 56 and I think there is about $300K sitting in the kitty above what is needed for regular maintenance. It's just as well because the building is ten years old and the paint has failed and it's going to cost $400K to paint it.
 
Thanks Depreciator,

Why do the owners corp not see a problem like we are seeing? The agent said that a majority of the owners corp are Chinese and they don't like to raise the levies to keep money in the bucket. I mean the levies are already 1300 for the 107 sqm lot I'm looking at. If they go up anymore, it will look very unattractive for future buyers. The way they see it, the quarterly payments are getting by, no need to raise, etc, and when something unexpected comes, we can just do a special levy and get it over and done with.
 
Who knows.
You mention the building manager is also the sales agent? Maybe the developer is still holding stock and wants to keep the levies low to make it easier to sell the stock.
Imagine if something big goes wrong with the building and money to fix it quickly needs to be dragged out of a bunch of owners - some of whom would live overseas.
 
The building was build 2002; no issues or major defects from the strata minutes at all over the past 5 years. All the sinking is going to general stuff like painting this, security guard, etc.
 
You seem pretty determined to buy it, so you might as well press on. But I don't think you will get anybody here telling you it's a good idea to buy into 177 apartment, 13 year old Meriton building with nothing in the sinking fund.
Good on you for finding out about the empty sinking fund, though. At least you're going into it with your eyes open.
 
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