Bank Valuation

[doxa5]

I have proposition to buy 2 bed apartment in Kew, $10-$15k below official bank valuation (my buying agent involve), but i have to make decision rather qickly, before property will be listed to the public.

Any idea, how much lower (in any) bank value the property to secure themself ?

Is apartment still good investment to buy ?

Thanks ! - Doxa

 

[sparky23]

Hi Doxa5

Can you tell us the price of the apartment and a few details, is there a fee to the agent etc then perhaps someone familiar with that area can advise you. Also do you have a copy of the valuation?

 

[doxa5]

Thanks Sparky,
-2 bed, 1 bath, 1 car bay, l'dry, 1st floor, 2 balconys, new kitchen, nothing to spend, small street, very close to public transport.
Tenants pay $380 p/w

Price to pay $440k + exp
Yes, bank valuation avalable

Thanks - Doxa

 

[doxa5]

Sorry - yes 2,5 % fee involve from the selling price = about $11K

 

[sparky23]

Hi Doxa5

So the fee you have to pay kind of eliminates most of the money you are saving to buy below valuation?

Are there any body corporate fees involved?

 

[doxa5]

Sparky, I do not know exactly what kind of corporate fee you asking for.

Doxa

 

[doxa5]

Looks like "Bank Valuation" must be very difficult subject. More than 100 members (some of them probobly very experiance investors) overlooked this post, and only one response.

Any more information ?

Doxa

 

[Ausprop]

i wouldn't lend any credence to a valuation, they really are all over the place. All you should care about is is the property good value for you.

 

[BayView]

Just compare the recent (less than 3 months) sales of similar properties in the immediate area. That's what valuers do.

Here's one I saw after 30 seconds of searching:

http://www.realestate.com.au/cgi-bi...r=&cc=&c=69793094&s=vic&snf=rbs&tm=1200241481

I don't know how it compares to yours in design, location, size etc.

You can do all that.

 

[sparky23]

I spotted that one too thats why I was a bit concerned but I don't know the area well enough to say too much. Does anyone else know much about the area that can help?

doxa5 if there are body corporate fees they will come out of your $350 rent each week towards the upkeep of the building unless that is net rent, you need to ask about it.

 

[bailz66]

The one above is a quest serviced apartment so its a bit diferent and not really compareable

 

[BayView]

The one above is a quest serviced apartment so its a bit diferent and not really compareable

I don't think the serviced apartment aspect would have a bearing on the value of the property. Valuers don't tsake rental return into account when they do valuations on residential property; at least not to my knowledge.

Doxy was asking purely about the property value. The rent return would another factor.

I know agents always trot out the old 5% return line when they get an investor making enquiry, but most agents don't invest, so they know jack.

In any case; I wouldn't buy a serviced apartment investment anyway; no control over pretty much anything.

The other difficulty with Kew is that practically every property is a bloody auction, with the advertised sale price range being a zillion miles from the actual sale price as usual.

I wonder when buyers are gunna wake up to this.

 

[bailz66]

I have noticed though that the quest Apartments sell for a lot less than the residential properties. I lived on Walpole street for some time and saw this first hand.

Was a great street to live on

 

[The Y-man]

Any idea, how much lower (in any) bank value the property to secure themself ?

Thanks ! - Doxa

Doxa,

The value will probably be set at your purchase price.

Cheers,

The Y-man

 

[GZM]

Doxa

Without seeing the property - it makes it a bit difficult to provide any meaningful comment.

BUT, if you can pick up a 2 bedroom unit in Kew with a car space and no reovations required for $440,000, I would have thought you're doing well, especially if it's renting for $380. Those numbers sound good for Kew.

A word of caution, which I'm sure you've considered, Kew has had massive capital growth over the last 12 months - that might mean that it will stagnate for a while - although you can never be sure.

Also, I've had some bad experience with bank valuations on two properties lately - both of them came in around $50,000 under what I consider to be "market value". I took from this that banks are tightening their lending policies and that valuers are being very conservative with their valuations.

 

[BayView]

I have noticed though that the quest Apartments sell for a lot less than the residential properties. I lived on Walpole street for some time and saw this first hand.

Was a great street to live on

Do you think this is due to the Quest apartments being bought mainly/only by investors, who I would no doubt be trying to push the price down, as opposed to the owner/occupied apartments where the emotion factor kicks in and forces the prices to stay higher?

 

[BayView]

Doxa

Without seeing the property - it makes it a bit difficult to provide any meaningful comment.

BUT, if you can pick up a 2 bedroom unit in Kew with a car space and no reovations required for $440,000, I would have thought you're doing well, especially if it's renting for $380. Those numbers sound good for Kew.

A word of caution, which I'm sure you've considered, Kew has had massive capital growth over the last 12 months - that might mean that it will stagnate for a while - although you can never be sure.

Also, I've had some bad experience with bank valuations on two properties lately - both of them came in around $50,000 under what I consider to be "market value". I took from this that banks are tightening their lending policies and that valuers are being very conservative with their valuations.

That's a rental yield of 4.4%. That doesn't ever sound good to me.

Assuming the entire amount is borrowed to buy (most people aren't buying $440k IP's with 20% SAVED deposit - equity in other property usually),
assume 5% purchase costs (general, but reasonably accurate),
assume the finance is 8%,
assume that 15-20% of the rent will be eaten by holding costs.

The weekly shortfall on the cashflow is: -$387 before tax return. -$20,164 per year.

If the apartment only sees 5% cap growth every year for the next 5 years (quite possible and probable, but could be less if the property market stalls) then the nett return on the investment is $1,836 before tax return.

It's an apartment, so there won't be an enormous amount of depreciation, and we don't know it's age anyway at this stage. Could be none.

That's a very poor return for an outlay of $300 odd dollars a week.

The C.O.C on the money is 11.7%.

 

[GZM]

In today's market, 2 bedroom places in Kew wouldn't often get a 4.4% rental return. If you're committed to buying into Kew, then that's a good yield for the area.

 

[BayView]

In today's market, 2 bedroom places in Kew wouldn't often get a 4.4% rental return. If you're committed to buying into Kew, then that's a good yield for the area.

So, are people jumping on for even less yield than this?

I hear this said by agents all the time about an area that they want me to buy in after I raise the issue of poor rent returns.

It's not good enough; the investment has to make sense NOW.

The fact remains; the return on that property based on the figures provided; is terrible. Maybe if you could add value, or sub-divide etc, but you can't to any degree.

Why would you buy it? Just because there might be some good cap growth in the future? There's no guarantee on that.

Meanwhile, there is a huge cash bleed while you wait around.

 

[aw1]

Wow, a 2.5% fee for a buyers agent.

I would be trying to get that down or walking away.. that's ludicrous.