Have I made a mistake?

[DennisLeung]

Hey guys,

Just had an offer accepted of $291.5K on the following property:

http://www.realestate.com.au/property-apartment-nsw-jamisontown-114308767

Block of 14, mortgagee sale

Numbers:
Rent: $340-350pw
Strata: $725pq (550strata/175 sinking fund)
Water: $175pq
Council: $225pq
LLI: $350pa
PM: $1500pa

My mum basically disowned me over this matter and says it is a big mistake due to the high strata and she wouldn't buy the property for even $270K. She says her friends have not even heard of Jamisontown.

What do you guys think?

 

[westminster]

Whilst I can't comment on comparable in terms of values etc I don't think the strata is unreasonable for a complex like that.

It would be smaller on an older complex but it looks to to be a pretty nice complex with features like underground car park which all has to be paid for.

Added bonus of depreciation to add to your figures

How is the yield?

 

[Aaron_C]

Looks fine.....brand new basically.

 

[DennisLeung]

Yield is 6.5%. What is the difference between strata fee and sinking fund?

 

[Scott No Mates]

• Walking distance to Penno leagues/stadium.
  
• Strata levies will be higher than for an older block as the owners may be more astute with their property, insurance value will be higher as it is a newish building.
  
• Presentation is quite high
  
• Depreciation benefits (get a depr report done for IP)
  
• Close to the industrial strip (jobs)
  
• Short drive/bus to Westfield/station

Sinking levy goes towards maintenance, strata levies are for insurance, water rates, etc.

 

[see_change]

You often have some element of regret when an offer gets accepted as you wonder whether you could have got it for less . What at comparable sales in the block and near by ? For $40 you can have access to previous sales data for the suburb from myrp .

Again I don't know that area well enough to comment on whether its a good buy for the area .

Strata fee pays for running costs . Sinking fund for future capital expenses .

Cliff

 

[Ace in the Hole]

Is your Mum an experienced and successful property investor?
If not, I think the mistake here is listening to your Mum and what her friends think.
Otherwise, do your research, be patient and be confident when you commit to a deal.
You don't need reassurance from anybody if you are confident.

 

[Ausprop]

Rent looks low against purchase price considering the outgoings and also that it is a mortgagee sale?

 

[DennisLeung]

Yes mortgagee sale

 

[Ausprop]

Yes mortgagee sale

what was the normal market value?

 

[DennisLeung]

http://www.realestate.com.au/property-unit-nsw-jamisontown-114737375

Same block listed for $390,000. In my opinion the price on that is too high

IMO the building is worth 295K but just second guessing the choice of suburb. Does anyone have any experience in Jamisontown?

 

[see_change]

You need to be able to compare it with comparable sales within the same suburb , or if its unique , have a good idea of properties that you can use as a bench mark as a comparison to work out a relative value .

Cliff

 

[Scott No Mates]

have a look at previous sales: onthehouse.com.au

 

[DennisLeung]

From my 'research' I guess I concluded this:

Other 2 bedroom units in the area are selling for 230K mark, however they are those older redbrick buildings

Other 3 bedroom units in the area are selling for the 330K mark, and they are of comparable age and quality, but in larger blocks

Other units in the same block over the last few years have not appreciated for some reason, where in fact they have depreciated. According to this link:
http://house.ksou.cn/p.php?q=Jamisontown&sta=nsw&id=1047380
Same block, but top level sold for over 460K

In terms of other blocks which are exactly the same, there are none as this one is technically a 2/1.5/1 in a newer block and it is 2 storeys which rules out pretty much all other units in the area.

My guess is that it was originally bought off the plan (hugely overpriced) and the fact is, the company previously owning it is now bankrupt and gone into liquidation.

 

[DaveM]

6 months ago similar age/style were selling in the 270's so its ridden the western sydney mini boom along with most others.

Talk to a few agents about rental return as it can be a bit slow due to higher than normal vacancies as renters have moved into FHB's

 

[see_change]

Dennis

Looks like you've covered most bases

One thing that hasn't been raised is how much would something sold in the last cycle , say around ten years ago .

Generally when we're buying ( in particularly in outer suburban areas ) I like to see something that hasn't seen much growth in the last ten years . 20 k in the last year isn't a worry.

Cliff

 

[ZachAnSel]

Dennis

Looks like you've covered most bases

One thing that hasn't been raised is how much would something sold in the last cycle , say around ten years ago .

Generally when we're buying ( in particularly in outer suburban areas ) I like to see something that hasn't seen much growth in the last ten years . 20 k in the last year isn't a worry.

Cliff

Indeed, wait until mid/end next year and we will see unit price in the same complex will raise at least 10% valuation.

OP just need to make sure enough cash flow to hang on..

 

[jaspn]

In terms of your mother's friends not having heard of Jamisontown; that is ridiculous. They're obviously not investors. I recently spend a week driving around western Syd, and my research of Jamisontown revealed it's a lovely suburb. Before I left it took all of 20 seconds using Google Maps to learn of Jamisontown and its proximity to Penrith. I would have bought there if yields stacked up, but they didn't; Prices have shot up in the past 3-4 months. I was looking for 7% gross minimum, but that's my strategy which may differ from yours.

If you're going off the agent's 'potential' rental return figure, be skeptical. I'd be taking 5-10% off that figure just to be safe, then a bit more for a possible upcoming loose rental market (see DaveM's comment). How does the yield look now? Is it serviceable?

 

[MsAli]

Dennis, talk to jmillar - he just bought in the area. Location looks great. Jamisontown is a home owners area and rents are high too.

 

[skater]

Hey guys,

Just had an offer accepted of $291.5K on the following property:

My mum basically disowned me over this matter and says it is a big mistake due to the high strata and she wouldn't buy the property for even $270K. She says her friends have not even heard of Jamisontown.

What do you guys think?

What you are experiencing is buyers remorse.

Who gives a flying fig what your Mum's friends think. Are they successful investors? I'd bet my bottom dollar they aren't.

Whilst I can't comment on comparable in terms of values etc I don't think the strata is unreasonable for a complex like that.

It would be smaller on an older complex but it looks to to be a pretty nice complex with features like underground car park which all has to be paid for.

Added bonus of depreciation to add to your figures

Although I'm relatively close by, I haven't been following the unit market in this area, but like Westminster says, on the surface it appears like it's reasonable, and there will be a heap of depreciation. I know not far away, in Kingswood you can get older units for around $200k, but the neighbourhood isn't half as nice & they are a lot older. The tenants should be nicer in your unit.

Is your Mum an experienced and successful property investor?
If not, I think the mistake here is listening to your Mum and what her friends think.
Otherwise, do your research, be patient and be confident when you commit to a deal.
You don't need reassurance from anybody if you are confident.

I agree. Do your own research. If you need input from anyone, family & friends are the worst to listen to. Although well meaning, they usually have no idea, so the advice isn't sound. Come here & ask others who are doing what you are trying to do & you will get well rounded advice.

Good luck.