EcoSquare on St Kilda Road : Comments?

Hi all,

Would love all your comments and experience on this.

I'm currently considering purchasing off the plan 1BR in this development for owner occupation. Its 7 stories high with a total of 77 units.

Their webpage is at www.ecosquare.com.au

The brochure says its "student living", but the first home buyer's grant may apply, so I guess owners can stay there?

My story's quite complicated; There are a few reasons why I'm considering this place instead of the 40sqm+ 1BRs a bit further south in St Kilda East, Balacava etc which have a much larger land component and more CG.

1) I'm just a contractor (not perm) and I've only been working full-time for about 6 months. So I don't want to assume the financial burden of a loan yet, and the banks don't want to extend me a loan anyway because I don't have documentation. That means I need to pay in full using cash.

I can access about 250K in cash now, which means after deducting purchasing costs I can afford about 230K only. That puts me well below the 250-280K (and with the FHB frenzy I guess the auctions will push that figure up even more) needed for a 1BR in the St Kilda East area.

2) I'm a foreigner currently on a bridging visa (which means I have applied for permanent residency). Thus I can buy second-hand properties for owner occupation only - i am not allowed to collect rent at all.

In the *very* unlikely case that my application is binned, I can continue to rent out my 1BR, since it is brand new and not second-hand, instead of being forced to sell or keep it vacant.

3) By the time of settlement in Dec 2010, I will have recieved my PR and will be able to access the FHG of 7-9K. This offsets the cost of me renting from now till Dec 2010.

4) I know the opportunities for CG are limited with so much student housing in the area and the low land component.

But right now, I just want a place to live in a good location, I don't really care about capital gains YET. I work on St Kilda Road, the place has great facilities, transports and shops.

My wife will grad from uni in 6 months and then we will be double income; hopefully I will make perm in about a year when the apartment is ready.

So when our incomes can support it, I plan to use a LOC to borrow against the existing equity in the 1BR, and only THEN get a proper, 40sqm apartment in the st kilda east area to start enjoying some CG.

My only fear is that the banks might not accept such an apartment as security for a LOC because :
1) its only 30 sqm
2) it's "student housing?"

Comments and feedback welcome.
 
Oh two more things.

1) Since I don't need finance for this, it doesn't matter that much to me if the project is delayed or something crops up during construction (as is often the case with off the plan developments).

2) Anyone has any comments (good or bad) about the developers?
 
It sounds like you have done your homework and provide some compelling reasons.

The site doesn't tell us who the developers are - Calder is just the agents.

You can take further investigation by asking for:

Architects and their previous projects (go and check them out)
Developers and their previous projects (go and check them out)
Builders (and also see their past/current projects)

Also, this project is almost next door to a 96 apartment department of housing project (aka "housing commission flats") - so it *may* affect local values

http://www.housing.vic.gov.au/buildings-projects/completed/k2-apartments

Cheers,

The Y-man
 
Thanks Y man for the quick response.

I'll definitely take a discreet stroll around that project with your comments in mind.

long term CG is not so important to me for this particular purchase since I plan to draw out most of the equity into a proper IP with CG potential, once I can actually qualify for and afford to service a loan.

Basically this is just a place to live (and get that tiny bit of exposure to the market) so I can stop paying rent. It helps that I am not leveraged at all too.

The problem is if the banks refuse to do a LOC so my equity remains stuck in the apartment.

What do you think are the chances of that?
 
EcoSquare Apartments

Hayball look like they are the Architects. I know they do really nice modern Buildings - pretty well Known Architects. You can tell that the Building looks very modern. A lot of these "student" apartments look very cheap and tacky, these ones look very high quality.
Calder tell me that Developers have been in the game for 20 years.
I like the depreciation schedule they have - you can always tell the guys that know what they are doing, the depreciation schedule is well presented.
I wanted to buy lot 512 but it was sold. I have now decided to buy a couple on the lower floors to add to my portfolio.
I like the stone benchtops - its pretty rare to find this type of quality in small apartments.
On the note about the housing opposite the road - K2 was in its time - the mecca of sustainable living in apartments , it was built by the state goverment with no budget in mind and is state of the art. My Aunty lives in there and it whilst it is goverment housing - they cater for the older generation - so it does not have the normal riff raff that is around goverment housing. It is Windsor - and I reckon Windsor is always better than Prahan. Beautiful building, Agents are ok - should be a rippa I reckon.
 
Ecosquare apartments

Nab I know lend 70% against these apartments - I asked and they said that they like the building and the area. They will lend 70% for any apartment in the complex that is over 18m2 inc balc. That covers the whole building.
Cheers
 
ecosquare apartments

I own 4 of these student apartments elsewhere. 3 are in prahan area. I am getting $ 280 - $ 310 a week per apartment. I am a big fan of small apartments close to town and am not fazed about the size of them. It has always worked out for me. I reckon you could get $ 285 pretty easily for a $ 200k purchase price apartment in this complex. Property that is positive is always interesting to me. It offsets the high growth negative stuff I have. I reckon every Investor needs a few positive geared apartments in their portfolio. Any Accountant will tell you that. Cheers
 
I own 4 of these student apartments elsewhere. 3 are in prahan area. I am getting $ 280 - $ 310 a week per apartment. I am a big fan of small apartments close to town and am not fazed about the size of them. It has always worked out for me. I reckon you could get $ 285 pretty easily for a $ 200k purchase price apartment in this complex. Property that is positive is always interesting to me. It offsets the high growth negative stuff I have. I reckon every Investor needs a few positive geared apartments in their portfolio. Any Accountant will tell you that. Cheers

Gee you almost sound like you sell them too!:rolleyes:
 
Property that is positive is always interesting to me. It offsets the high growth negative stuff I have. I reckon every Investor needs a few positive geared apartments in their portfolio. Any Accountant will tell you that. Cheers

And many successful property investors will tell you that, too. Adding some positive cash flow properties to the mix is another way to get around the serviceability wall.
 
investing for personal circumstances is PERSONAL - not strategy - so other people's thoughts are irrelevant.

sounds to me like you're doing the right thing, paying out your own place instead of someone elses AND you're not leveraged to do it - but then, i'm not you.
 
Capital Growth?

Hey Andrew,

Low Capital growth I reckon - but huge ongoing taxable depreciation benefits. I haven't needed to sell yet and probably wont need to whilst its going along at Cash flow positive. By the time Ive sucked out the depreciation - the growth will kick in. I only buy the cheaper apartments - circa $ 190k. I find they have approx 100k in depreciation in them (which is huge!! - got something to do with that the building is more intensified - hence the amounts of depreciation are a lot higher than a normal apartment) The depreciation on the smaller ones are the same as the more expensive apartments - so the reality is that if it costs me nothing to hold and I can take the depreciation along the way, Im already up, any CG is a bonus. Obviously the CG will be slower - but like all Real Estate - it will still go up over an extended time period.
I reckon say 10-12 years to double. You can imagine what 10 years time will be in this area - the location is currently A- and will be A+ by that time.

Paul
 
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