Buying an apartment block as a group...not a JV or Syndicate.

[AdRock]

Recently, a block of apartments has come on the market in a great area of Elwood. The block consists of six apartments and is going to auction as a single lot. This is my first foray into the world of IP's and needless to say, I am unable to afford the block in its entirety, but I was wondering about getting together with five other interested buyers, and purchasing it as a group? Not as a Joint Venture, or as a syndicate, but with each member purchasing a separate apartment in the block.

There is no strata title in place on the property, as it has been owned by a family since its construction in the 30's. So I'm assuming that there would be costs involved in creating one, and potential difficulties working out allocation of carparks, etc.
Also, like parents allocating bedrooms to children, it could prove difficult negotiation who would take ownership of which apartment (and what the comparative values would be amongst the distribution...)

Does anyone have any experience or thoughts on the benefits, complexities, hazards of such an agreement?? And whether it is something that would be best organized by a professional, or could potentially be organized by the individuals involved??

Any help is much appreciated,
Adam.

 

[JIT]

What's the point of doing this though?

I don't think individual apartments are that hard to find in Elwood - not yet anyway, it is a great suburb (but, not very good soil in the area I heard).

Apartment blocks don't come along that often so unless you want to buy the whole block or most of the block, or say at least 2 apartments in the block, I don't see the point of all this? You could easily just buy a single apartment without all the other extra hassles.

Maybe you could get it cheaper (when you divide up the block cost by the number of apartments), than buying individually, but I'm not sure? I wouldn't really suggest doing this as your first purchase.

GSJ

 

[AdRock]

Thanks GSJ. Yes, the point is to hopefully get into a great apartment in a great street at a reduced price.
In the last six to eight months a basic 2BR deco apartment with carpark in this area has increased from about $390k to about $440k. Speaking to the agent for this property it seems that price expectations are around $2.1m for the block -meaning an average of $350k per apartment.

It is possible that a developer will want to flatten the block, and build gazillion lego-style apartments... in which case the expected price of 2.1m could be pushed well up (... and the council sure has allowed some dreadful new apartments to be built in the area ).
But, imho, the property will be bought, the interior renovated and the period style apartments will be sold seperately at a premium. If this scenario is accurate it would seem to make sense to try and cut the middle-man out.

Could be just a pipe dream though...

Here's a link to the property I'm talking about:
http://www.realestate.com.au/cgi-bin/rsearch?id=104077058&a=qfp&cu=fn-rea&t=res&q=Go

 

[myla]

hello,

i reckon the 2.1m estimate is about 400-600k of the mark,

the council is giving green light to either do the following with this sort of property:

allow them to go up, therefore maybe creating an extra 3 properties on top (which developer loves, as thats the money)

or allow them to build on surrounding land, in this case carparking and grounds area, therefore creating more titles

this game has been hot for around 18mths in the bayside areas

depending on area and developer some just refurb some build up, also with council getting rid of requirement for carparking

thankyou

myla

 

[alexlee]

Honestly, sounds like a nightmare. You would have to strata title it before you buy it, but before you buy it you have no right to strata title it. Even if you do somehow do the buy as you described, you basically ARE a JV, with all the potential arguments, etc that come with it (I realise that legally it won't be a JV, but in reality it will be).

If this is your first investment, may I suggest just a standard 'buy a unit' strategy?
Alex

 

[AdRock]

hello,

i reckon the 2.1m estimate is about 400-600k of the mark,

myla

You could well be right Myla. And it could turn out that after all the legal fees and effort involved, we never really had a realistic chance of affording the property in the first place.

As far as development on the site goes, I'll be interested to see when the Section32 comes out whether there is any kind of Heritage Overlay on the property.

If this is your first investment, may I suggest just a standard 'buy a unit' strategy?
Alex

You know, that idea's just crazy enough to work!

Yes it is my first property investment. And my assumption that, in this case, the whole is cheaper than the sum of it's parts, could be an incorrect one...

Thanks for the responses