Buying a townhouse in a large complex

[tonyc00]

Hi

I would appreciate some comments/ thoughts. I have a bias against buying a townhouse in a large complex (50) of similar townhouses.

However the location is good - close to shops/ transport/ schools. Its tenanted, and the strata fees are reasonable, and overall its positive geared (in Brisbane). It ticks all the boxes but still I'm reluctant because it one of many others in the complex.

The upside is that being in a large complex there is plenty of reference material regarding previous sales history/ rental returns for similar townhouses.

Am I being irrational ?(I think I am), because what is the downside/ negatives ?

After all, surely its no different to buying a unit in a large building of similar units (and many investors are doing that !).

Any comments would be appreciated.
Tony

 

[Jamie M]

Hi Tony

While it's not quite botique - 50 isn't a huge complex relative to the size of some of those up in QLD.

My thoughts are similar to yours. I'd be reluctant based on the size of the complex - but if everything else stacks and up and the price is right then I can't see why not.

Cheers

Jamie

 

[Roosterman]

To me the downside is that any one of the 50 owners could be in financial difficulties and has to sell their townhouse in a hurry/firesale. Your townhouse's value is then negatively affected by that sale price.

Of course this can also happen in a six pack or eight pack, but you are reducing the odds of this occurring when you buy into a smaller block...

 

[chrispy]

I have one in a group of 20. I would never buy in a large group again.

I was unlucky in that the people that got themselves on to the Committee spent the levy money on items that it was not destined for. They simply put through Committee Minutes etc. and changed the purpose.

They have now been outvoted but it will take some time to correct the problems they made. In some instances the problems will never be corrected.

Chris

 

[Nattl3s]

Ive got a townhouse in a complex of 40. Never had an issue renting it. People above have good points. In my case someone sold for an extremely good price last year and since then the values have gone up nicely. Last 2 sales have been really good but I guess the market is also better. As Chrispy pointed out - sometimes numpties are in charge of spending BC money. Can be a lot of restrictions on tenants which can be a good or bad thing I suppose - eg no pets, limited visitor parking etc etc. BC really eats into cash flow in my personal experience. Cant do anything outside without BC permission generally.

 

[Jake Milne]

Hi Tony

While it's not quite botique - 50 isn't a huge complex relative to the size of some of those up in QLD.

What?! We're talking about townhouses, not apartments... 50 is a ridiculous number... No deal!

 

[Jake Milne]

Reasoning...

In short: Supply vs Demand.

Longer answer: At any given time there may be one or more other townhosues in the same complex for sale. If you look to sell people will have the choice of buying your townhouse or possibly another one. Naturally people are going to want the one that is cheaper so you have downward price pressure on your property whenever another one is on the market. The same goes for rental.

Aside from this you?ll also have issues with getting the strata group to agree on things in the future. You need a 75% majority vote to pass a motion for maintenance or improvements. That means you have to convince 38 owners to spend money on something if you want an issue fixed. Basically these large developments can become very run down after 10-20 years.

My rule is that you don?t purchase in any townhouse complex that has more than 12 units. That keeps supply and demand in check and means you?ll achieve more growth.

 

[Jamie M]

What?! We're talking about townhouses, not apartments... 50 is a ridiculous number... No deal!

Ok - noted. Thanks.

My first purchase was in a similar sized complex and valued up by $100k within three years of purchase. Admittedly it was during an upswing in the cycle.