Block of Flats ("The flock of bats") for sale

I've posted many times about my flock of bats in Queanbeyan- but now they're reluctantly for sale. The cashflow in the business is suffering due to a 10 year P&I loan @8.5% (business loan) so we unfortunately need to sell.

There's 9 1BR units- 8 in one block, and a stand alone caretaker's unit. Seven of them are fully furnished and have been "lightly" renovated (paint, carpet, polished floors). The caretaker's unit and one unit have the original tenants so have not been done up.

As furnished units, they're generally not long term tenants- 6-12 months is about the norm. But vacancies are generally short, quite often just days.

Rents are currently:
.$169 pw for two units, and asking $169pw for two units vacant now (they are not yet vacant, there has been interest in both).
.$160 pw for three units; as leases expire, these will go to $169pw
.$130 pw for the one unfurnished unit in the main block
.$40 pw for the caretaker's unit. I've been told I should be raising his rent, but I haven't had the heart.

That's $1326 pw if the vacant units get their asking rent, with another $27 pw achievable in the short term.

As furnished units, there's lot's of depreciation.

The two units vacant are on allhomes .com.au

Asking $850,000- but we will are looking at going to auction.
 
Last edited:
Glebe said:
At ~7.9% that's a healthy yield. Best of luck Geoff.
It's done well for us, and I hate to see them go.

I didn't mention. It's under one title. To strata title would require fire rating parts of walls and underneath.

I'm not sure how old- I'm guessing about 40 years, so no building depreciation.

The property manager is very good- there's not very much I have to do.
 
Some more about Queanbeyan, surrounds, and the block.

For a block map- see http://allhomes.com.au/c/ah?a=uiad&i=35902

The maps shows 1216 square metres, the info 1195 sqm.

When I bought it, it was run down with a very low class of tenant- it was the bottom of the rental range in the Canberra area (short of a caravan park). Furnishing has raised the level of the tenant, and I've had a lot less tenant trouble as a result (it's the one non-furnished unit who needs the occasional prod now and again).

The units front onto Kinkora Place, and back onto Morton Street. On Kinkora Place there's four parking spots, right off the footpath (they would not be approved now). From Morton Street, there's six parking spots- two for visitors. There's no carports. I investigated this, but the company which did the work took their time, and after 12 months I gave up. I don't have the time at the moment- Subway keeps me too damn busy.

Construction- concrete brick block, outside and separating each unit; timber outside the units. Floors are Tasmanian Oak-they have polished up quite nicely.

There's storage space underneath. The Kinkora Place units are at ground level; the Morton St end ones are one story up; the units are stepped down.

State of repair- they have needed a few minor repairs, but not major. Hot Water services are old, I was told they might have needed replacing, but that hasn't happened yet. There are cracks (as you might expect in an old place), but nothing major

Heating is from a small electrical heater in the lounge/kitchen, and another one in the bathroom.

Furnishings:
.Small microwave
.Oven/hotplates (standalone)
.Bar fridge
.Kitchen table/chairs
.Leather lounge
.TV, TV stand, VCR/DVD/bookshelf hifi (various combinations, but each furnished unit has all 3 combinations)
.Large builtin mirror door wardrobes
.Double beds
.Front loading washing machine

I didn't initally go for strata title because:
1. Rates would have gone up substantially- it was not worth it as a B&H (though now rates have gone up anyway, so a moot point)
2. Construction would be required. The underfloor areas are connected in pairs, and would have to be bricked up to separate; some above ceiling areas may need to be have the same done. Ceilings would need to be fire rated- this last one would have been hugely disruptive to tenants.

Caretaker- he was there from the start. He's a really nice guy. He tends the grounds (have a look at the pictures- there's some nice garden growth down one side; there's a lawn area out the back). He keeps an eye out on the tenants, and lets the PM know if there's any problems. He's been able to alert us early of problems.

There's limited potential for more units as I understand. While there's space, the area is zoned singe residential; under "prior use" I might be able to add 10% of the floor area.

Queanbeyan is the poor sister of Canberra. It's never had the support which the ACT has from the government. But we lived in Qbn because, when we came, we could afford land and not a building; in the ACT we would have been forced to build within 12 months, and in Qbn we were able to wait a few years until we could afford to build on our block.

The units are in an older part of Queanbeyan. On one side, there's a Macedonian bloke who has lived in that house for many years; there's rental houses on the other side.

I don't see a lot of movement (in either direction) in the short term- just like a lot of NSW. Canberra rose very slightly in the last quarter, it had dropped a little before that. Queanbeyan, although country NSW, is in a lot of ways a dormitory town for Canberra, and is influenced a lot by that market.

There are a couple of top of the range new unit blocks in Qbn coming onto the market- but, being more expensive than a house, I don't think they will influence the rentals much.

Because it’s cheaper than Canberra, Qbn tends to get people who can’t afford Canberra. Initially, I did have some quite bad tenants- there’s a few stories in the forum. But making them furnished has raised the standard of the tenant a lot- that was a nice change, which I did not see coming. The people looking for the cheapest they could get because they were on a pension could no longer afford the place.

Tenants since have been 6-12 months. They’ve largely been people needing a place for a shorter period of time. There’s been newly separated people; people doing business in Canberra; students (usually post grads with scholarships); people transferred into town who need a place until they can establish themselves; or people with family nearby. We’ve only had one bad tenant in the furnished units- a 17yo party girl- a demographic I’ll be careful of now.

I’m not sure that they are suitable for further renovating- more upmarket tenants would more likely be looking for 2BR+.

The entire neighbourhood has been around for a long time, and has not changed much for many years. They are zoned residential- no more blocks would be allowed there now.

They are a block away from the bus into Canberra.
 
Outside- pictures

And some piccies

From the front RHS, showing parking space


From the front LHS, looking down the pathway


Looking back up the same pathway


A little closer view of the outside
 
hey geoff, i looked at those units on the weekend!
they have nice street appeal.
sorry i cant buy them from you (no money)
i like that part of queanbeyan, the lower class are slowly being squeezed out which is a good thing.
good luck in selling

cheers
shaun
 
vacancy rate

Hi Geoff,

What has been the vacancy rate over the past year?
At a value of 850K what would hve been the return on the past 12 months taking into the equation vacancy factor?
What are the outgoings?

Thanks

Glenn
 
Vendor financing- possibly- but the price would have to reflect- that could defeat a little of the purpose of the sale. Money which would bve offsetting 8.5% loan + principal payments would instead be earning a resi rate.

Glenn- vacancy rates have been quite low. The average occupation is perhaps 9 months, so letting fees are higher- though a number of vacancies have been break leases where the outgoing tenant has paid for relet fees. We have had a number of tenants who have come to town trying to find a place to buy- the place with its furnishings has been ideal for those tenants- but they will often find a place to buy before the lease expires.

I'll try to do up some figures on outgoings- I'll talk to my PM.

Management fees have been 6% + GST (a discount due to multi unit + buying from the same agent).
 
geoff - i feel for you. i know how you love the "bats". hope all goes well in the sale and only wish i was in the area to seriously consider purchase.
 
Yeah Geoffw and the bats are a set.
So geoffw is this like a divorce or the kids leaving home ?
... one being a sad event the other not so ... I'll let others decide which is which
 
TomL said:
Are you willing to Vendor Finance the deposit? ;)
Having thought a little more (and asked a little more)- vendor finance is a possibility. I'd consider vendor financing any difference between $800K and selling price- two years term, interest rate bank variable + 2%. Other terms negotiable. Both agent and lawyer are familiar with vendor finance, so should not be a problem.

The auction looks to be around July 21. The figures (vacancies, rent etc) should be in the agent's brochure when it comes out. I'll post then.
 
lizzie said:
only wish i was in the area to seriously consider purchase.
Lizzie

Being in the area is NOT a prerequisite! The PM is fantastic- they have done a GREAT job at reasonable rates. Before some of the bad tenants were removed, there were a number of tribunal hearings- and the only reason I ever attended was because I wanted to see what went on.

The PM is the same agency as the selling agency. And I had a good deal on the PM rates because I also bought through them.
 
i was tempted when i first saw your post - but this week i put in an offer on a place where i can eventually bulldoze the house and put up 6 townhouses ... so looks like i'm tied up again.
 
arrrghhhh !!!!!!

arrrggghh ! I just saw this post....damm, I wish you weren't doing this....These flats are in a 2(a) zone (single dwellings or a dual occ only) and you would never get this yield again on this site but with the possibility of a future re-zoning when the Department of Planning gets its act together and the new standard LEPs are in place, you could apply for a 2(c) and maybe get it (four storeys).

Good luck with it.......I knew you were thinking of it but I hoped you weren't actually doing it.
 
The sign out front



And a view from the front


Some further clarification as to why I am selling...

I would MUCH prefer to refinance and hold. But, as a self employed business person, NAB require three years in business to show servicibility- I've been in Subway only just 18 months. And even then- the loan repayments for the business loan are cutting deeply into servicibility.

The block is a nice cashflow investment, with extremely good management. There is certainly room to add value. carports would add value cheaply (I've been too busy to do this); strata titles, though awkward and perhaps costing (because of fire ratings) could be achievable with a little better cashflow.

There's one unit left to be renovated, plus the caretakers unit.
 
just do it said:
Hi Geoff,

What has been the vacancy rate over the past year?
At a value of 850K what would hve been the return on the past 12 months taking into the equation vacancy factor?
What are the outgoings?
Glenn

I can give you some figures on that- I've just had some back. Sorry for the delay.

Total rent for the year- $66,642. Though rents for 4 units have just recently gone up by $10pw, four more will follow when the opportunity permits.

The vacancy rate over the last 3 years has been 1.8%; the average vacancy has been 6 days. (This includes time where units have been renovated- one took 3 weeks. The caretaker has been in his unit for almst 25 years.) The agent thought that the average vacancy in the last year, when there were no renos, would have been 2 days.

One unit has just become vacant, but is being left vacant to allow initial inspections without affecting tenants.

Outgoings (electricity, maintenance, agents fees)- $7545.42 for the last year.

Council rates- about $4500.

There is excellent underfloor storage.
 
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