Buying a block of units

[csc2]

At the moment sitting very comfortably with what we have but toying with a similar idea of picking up 3 in a block of 4 to own all.

Basic figures only.

Cost roughly around 1.2m. Return around 4.5K per month.

Has definite potential for future expansion or development.

Trying to decide on best way to submit an offer to other owners.

Annoying part is could have picked up the whole lot for under 250K a few years back but passed on it. You live and learn.

Decided early last yr we had enough properties and no need to buy more but something keeps nagging me to just grab these and then call it quits.

i concur about not buying units....I made a ridiculous mistake not buy a block of 4 units because i wouldnt negotiate over a $2k variation in what he wanted to what I would pay plus he had bloody fish breath......I just couldnt get into a meaningfull discussion with him person to person..........It got that bad even with phone calls i started to think the smell was going through the lines..

Seriously did my head in when i saw them sold for nearly $800k just three weeks ago...Not a bad increase from $230 in 8 1/2 years...

Every day is a good day to buy r/e if you hold long enough...

Lesson: never walk away from a deal you know will make you great money, just hold your breath and get on with it!

 

[buzzlightyear]

Land Tax.....forget me not

Don't forget land tax.

Don't know land value of the property in question so plugging figures into NSW OSR calculator $600k land value is $3684 per annum, $700k is $5284......

 

[DanielG]

Thanks guys. I agree any block of units is a great investment, especially close to the city. The key here is the ability to hold onto for a few years until the increase rents cover and then surpass the outgoings.

Ive redone some of the figures with some of the suggestions made here, and I think I am looking at about 2K shortfall each month.

Unfortunately that's too high a gap for me to cover. Ill call and offer a *very* lowball offer as see what happens. At the end of the day there's no point in buying something in the hope of making a mint in 10 years when you may not be able to service the debt in the first few years.

 

[Y33]

Don't forget land tax.

Don't know land value of the property in question so plugging figures into NSW OSR calculator $600k land value is $3684 per annum, $700k is $5284......

What is land tax? That's right something you southerners get stung with.
NT for me.

 

[Player]

Hi Daniel,
this is an interesting thread.

Ive been looking at doing a purchase of blocks of units, and was wondering if someone who has done this can advise me.

For example, I found a building with 4 / 2 bedroom units in Cammaray and began doing some numbers. As I see it, this is how it turned out (broken into per/month),

PURCHASE

Cost $1,500,000.00

Is this the actual cost (i.e: what they are asking or indicative range) or your cheeky offer proposal? I am not that familiar with all of Sydney however this is a kick-a$$ locale, I would have though even an old four-pack would have been around the second multiple of seven figures or at least high-one's

Deposit $150,000.00

As others have mentioned, good luck getting an LVR like this

Loan $1,350,000.00
Monthly Repayment @ 7.5% $8,437.50

CashFlow

Rent $9,040.00

Are they renovated? Here's a link to one fully refurbished in an old small complex:

http://www.domain.com.au/Property/For-Rent/Apartment/NSW/Cammeray/?adid=6801294

Your rental figure may be a little optimistic. If you've done further DD and are very familiar with the market, that's well and good. If not, always err on the cautious side and downplay your expected return

Water $200.00
Council $143.33I pay more than this on a four-pack in Parramatta

Management $52.73Is this property management fees? Based on your rental figure even at a cheap 5.5 % that number would be around 500 bucks and likely north of there.

Insurance $250.00
Estimated Repairs & Maintenance $416.67

Again allow more than this. Your garden/grounds upkeep alone will be about $200 per month let alone other repairs.

Estimated P& L $7,977.27


Total Cost Per Month -$460.23


According to this calculation, it isnt a good investment. I just wanted to ask whether I am on the right track when calculating this for a good investment or if I am missing something altogether?

Thanks

Not having a go Daniel. It's great you are sharing and that's the only way to learn by fleshing out numbers and getting feedback from others.

I note from your latest post that you're going to pass it up anyway. You must do what suits your pockets, risk profile and expectations from the deal

BTW, if it were truly negative by 2,000 bucks a months, I would take it for the growth prospect alone, however, I think you would find the arbitrage would likely be considerably more than this.

Fantastic that you're sharing and running numbers. Keep looking and analysing. Consider these feasibilities a little like paper trading the stock market. Keep running numbers and you'll find something that stacks up and ticks your boxes.

Good luck

 

[JIT]

BTW, if it were truly negative by 2,000 bucks a months, I would take it for the growth prospect alone

Yeah me too, 2k per month is cheap as.
But as you say, I think the figures are way off the mark.

 

[DanielG]

Yeah me too, 2k per month is cheap as.
But as you say, I think the figures are way off the mark.

What makes you think the numbers are way off? What am I missing?

 

[DanielG]

Im looking at this one building, but its not strata titled. What does that mean exactly? That there is no body corporate managing the property?

Can anyone explain the pros and cons of a block of units being strata-titled?

 

[Player]

Im looking at this one building, but its not strata titled. What does that mean exactly?

They are all in one line (one title). Each unit does NOT have it's own title.

That there is no body corporate managing the property?

Because they are in one line (a whole piece of pie as distinct to several slices of pie) you as a potential owner run the whole show

Can anyone explain the pros and cons of a block of units being strata-titled?

These threads may help with info also:

http://www.somersoft.com/forums/showthread.php?t=55592&highlight=strata+block+units

http://www.somersoft.com/forums/showthread.php?t=49618&highlight=flock+bats

http://www.somersoft.com/forums/showthread.php?t=56435&highlight=strata+block+units

For me I prefer them in one line. Less costs such as land tax, council rates, insurance etc.

If you wish to borrow a higher LVR, they are better of strata'd as you can go with different lenders for each title. Cost rise though as mentioned above. You may elect to sell off one by one if they are strata titled.

By the way, your response to JIT above about numbers being off the mark stems from my earlier post above. I also raised questions, that you need to address about some of the figures you've included. They seem very conservative to me.

 

[DanielG]

Thanks player. Appreciate the info.

If I want to make them strate-titled, is there a big fee involved in this? Is there anything special I should be looking out for that will blow my budget?

 

[Player]

Thanks player. Appreciate the info.

If I want to make them strate-titled, is there a big fee involved in this? Is there anything special I should be looking out for that will blow my budget?

Haven't gone that path and have no desire to as I always want lower outgoings whilst still having full control. You will need a surveyor to probably coordinate most of the process.

I would think the key point is fire rating. Check construction material. Fire proofing needs to extend into the roof space. A building inspector should be able to help you

Also check with council town planning what their criteria are. Could be different from one council to another and you guys in Sydney are over-governed by way of local municipalities. Too many councils spoil the broth.

Separate water meters will also be required.

Surveyor might be around five or so grand. Can't help with other costs as they will also depend on what fire rating works need doing and metering location for water, etc.

Some others who have undergone the process may be able to help with fees and further refine the process for you.

 

[jaycee]

Also check with council town planning what their criteria are. Could be different from one council to another and you guys in Sydney are over-governed by way of local municipalities. Too many councils spoil the broth.

Always nice to know you're not alone

 

[russellpeter]

have a look at www.yourstylegroup.com.au

they buy blocks of apartments and renovate them and sell/rent them out

I have spoken to them in the past and have watched them buy a block of 8 units gut, renovate and have back on the market in 8 weeks

they are always looking for the next block so must be money in it

good luck

 

[Qlds007]

There is good money in it as long as you buy them at the right price.

I have 2 blocks here in Brisbane a block of 6 x 2 and a block of 18 being 14 x 2 + 4 x 1 units. Hardest thing at the moment is Vendors thinking they have a valuable asset unrenovated and asking an arm and a leg for them.

I have owned my for 7 / 9 years respectively and they have well over trebled in value. Even with the land tax wouldnt sell them given the yields we get on them.

 

[russellpeter]

I have 2 blocks here in Brisbane a block of 6 x 2 and a block of 18 being 14 x 2 + 4 x 1 units. Hardest thing at the moment is Vendors thinking they have a valuable asset unrenovated and asking an arm and a leg for them.

I have owned my for 7 / 9 years respectively and they have well over trebled in value. Even with the land tax wouldnt sell them given the yields we get on them.[/QUOTE]

hi Richard

I am a BDM and talk to a lot of owners regarding the rent yield and have found a lot of these older apartment blocks are way under rented

I just took over a block in Yeronga that had 8x1 bedroom apartments and were under rented by over $150pw for each unit

The one thing I would recommend if looking to buy or have a block of apartments is get a independent rental appraisal especially is self managed

you are right about they thing there property should get the same amount as a renovated apartment

 

[Qlds007]

Hi Russell

Must admit you have me on what BDM stands for (I know what it would be in the finance sense).

Yes i dont self manage any of my properties i went one better and bought the real estate agency.

Totally agree with you about properties being under rented. Dont think i have that problems lol.