Blocks of Units/Multi-Occupancy

[Kirsti]

Hi folks,

What opinions would you seasoned investors have about multi-occupancy properties? (Duplex/Triplex/Small blocks of flats etc)
They obviously provide better returns than single family homes. A factor in this would be that the owner-occupier market isn't interested so there is less demand (and therefore slower appreciation?).

If unable to be strata'd are these sorts of properties classified as more like commercial?
Does anyone know what the typical maximum LVR on these is?

Thanks in advance

 

[The Y-man]

If unable to be strata'd are these sorts of properties classified as more like commercial?
Does anyone know what the typical maximum LVR on these is?

Thanks in advance

My understanding is that as long as they are zoned residential, and each unit has >50sqm (?? I think ??) floorspace, you should theoretically get residential LVR's on them.

Cheers,

The Y-man

 

[sailor]

My understanding is that as long as they are zoned residential, and each unit has >50sqm (?? I think ??) floorspace, you should theoretically get residential LVR's on them.

Cheers,

The Y-man

We bought a block of 4 units (single title). The LGA had it zoned as residential. The bank considered it a commercial loan (cos more than 3 units) and we therefore only got a 60% LVR. So there is a difference in how the banks and the councils zone land. Go figure!

Apart from that, the CG is not as high as in single residence properties, but the CF is a real beauty...especially if you buy good renovatable stock and do it up.

 

[geoffw]

Do a search for "flock of bats".

I had one for a few years. They did good for me. I would rather have kept them, but circumstances changed.

Like Sailor said. Many banks consider them commercial. NAB didn't. But then we had trouble refinancing them- the pool of lenders was samll.

 

[alexlee]

They obviously provide better returns than single family homes. A factor in this would be that the owner-occupier market isn't interested so there is less demand (and therefore slower appreciation?).

Why would blocks necessarily provide better returns than single family homes?
Alex

 

[gerd.]

When renovating a single unit in a 4 pack you only work on 25% of the purchase at a time, leaving 75% of the yield in place, as apposed to renovating a single purchase which results in a 0% yield for the during of the reno.

Gerd

 

[karina]

I like duplexes, triplex and 4 packs (I have each of these in my portfolio) I like them as they generally provide a higher yield than a stand alone house. Also provide opportunity to strata title that can lift the value. I have just got aprooval from council on my first strata title project, triplex, strata titled into 3 units, cost of about 5k to do. Purchased property in Nov for 490k , value of each unit now strata titled should be 220-240k x 3.

Duplex pairs are pretty easy to finance, on my triplex I got 70% LVR (we should now be able to raise to 80% as strata titled) , and 70% on the 4 pack as well. some banks may do up to 80% and some as low as 60% depends on the lender.

The good thing is you don´t have body corporate to pay, you control the land , the tenants in the complex etc. Also when rents go up they go up by 2 , 3, or 4 times a standard house!

 

[APerry]

You can mortgage insure up to 4 units on one title, so 97% (including LMI capped up to 2% is possible, full doc or lo doc. The only reason you wouldn't qualify for this is if the mortgage insurers have restrictions on the area or there are not enough comparables. You can stay with a residential lend up to 6 units on title, if it is a full doc loan.

Regards
Alistair

 

[GoAnna!]

Why would blocks necessarily provide better returns than single family homes?
Alex

Because the yield is what makes thme attractive especially if they are all on one title. We have one with 13 apartments on one title. On purchase return was over 12%. Now with renos (as Sailor mentioned) the returns are around 18% even after taking reno costs into account. Family homes have a far great group of potential buyers and hence greater capital growth and lower yields.

You can also get great rent increases each year when they go up $10 - $20 per week each! The other thing I like is that the value is ver much attached to the yield which is often the go with commercial and so with my increased rents i get increased values. So the block I would for $450K in 2001 is now with around 2 million. Rent began at $55K per year and will reach $150K this summer.

This yield then helps me hold other properties with higher capital growth and lower yields.