Help on the Aprtment development at Burnley Street Richmond Melbourne

Hi Everyone
I am interested to purchase a unit in the new development at Burnley Street Richmond Melbourne. There are 44x1 bed room apartments and the price is ranging from 385K to 395K. What is your opinion about this development? It is off the plan and will be completed at the end 2011. return is going to be around 6% as per the rental appraisal provided by the vendor.

Regards
Velli
 
Velli

Firstly it is in a very good position as it is within walking distance to city/transport/food etc etc. However I would not take a vendors rental appraisal as anything. Have you seen the anaylisis to how they ascertain your 6% return. Does include body corp/sinking fund/insurance/management fees and a plethora of other outgoings. Not including these outgoings they expect you to rent for 450 per week, including these outgoing ( not knowing what BC and sinking fund will need to be at) for you to get 6% I would imagine you would need to rent at somewhere between 540 -580 at a minimum and for you also earn inexcess of $120k as there figures usually are based on you being in the highest tax bracket, to get the makximum tax returns for things such as depreciation/negative gearing. Although as firstly mentioned the location is fantastic make your decision on a business decision (unless ofcoarse you expect to live in it) and see if ALL the numbers add up not those just shown by a vendors appraisal as there interest is not towards you.

Jezza
 
Thanks Jezza and Buzz.

Hi Jezza,

Thanks for the detailed message.
I am in Sydney and not sure how much you can get on that for a 1 bed room unit. You are right about the 6% return. Need to check with the agent about the BC, sinking fund and other fees invlved.


hi Buzz,
thanks for the link


Regards
velli
 
Velli

Only ask the agent 3 things being you are in Sydney.
1. Can I have a look at the floor plan and images and any views that artist will show can be seen from each wing.
2. Can you send me the section 32 and any contract information
3. Can you send me the financials that back up his claim.

Once you have these then you
A) extract there PDF of financials into a spreadsheet and where it has wage enter yours, then enter ALL outgoings that you should be able to get, do not use his as base.
B) Ring 3 real estate agents in Richmond ( there is a couple in Bridge RD) and ask what they are expecting a 1 bed to Rent for at the moment, you will probably fin this info on realestate.com & oldlistings.com
C) Find out what other developments are expected for the area. Some realestate agents will give you this information as they also would have bid/tendered/asked/begged for the right to sell them

Also as Buzz mentioned with the link. Research sites such as this for info on off the plan, take a open view as to what peoples opinions are and what sometimes little research they did before jumping in without doing there DD. Some people bought off the plan some 5 years ago and would be just breaking even on the value they bought them for ( not including all the the outgoings).

Jezza
 
As a local to Richmond I would be careful about buying on Burnley Road. It's an absolute bottle neck due to it's access to Citylink. We avoid it at all costs. Consider it's position in Burney St maybe. Coming off Bridge Road, Swan St or Citylink, how far up is the apartment?
 
Hi Everyone
I am interested to purchase a unit in the new development at Burnley Street Richmond Melbourne. There are 44x1 bed room apartments and the price is ranging from 385K to 395K. What is your opinion about this development? It is off the plan and will be completed at the end 2011. return is going to be around 6% as per the rental appraisal provided by the vendor.

Regards
Velli

I am generally not a fan of new built apartments for investment, regardless of the depreciation benefits (kinda ironic, given I am a QS and do TDS's for a living, but that's another story). Living would obviously be entirely different. Assuming that is your budget, I'd probably look at 2 bedroom + 1 carpark flats (albeit, older style but less in the block) somewhere like North Melbourne (may need to go low $400K's) assuming the main criteria is inner city.
 
Hi Everyone
I am interested to purchase a unit in the new development at Burnley Street Richmond Melbourne. There are 44x1 bed room apartments and the price is ranging from 385K to 395K. What is your opinion about this development? It is off the plan and will be completed at the end 2011. return is going to be around 6% as per the rental appraisal provided by the vendor.

Regards
Velli

Is that gross rent sorry I am fan of CF+ only so wouldnt be a goer to us look elsewhere...
 
Things can go bad

Read this article from The Age website. Rent lower than projected and BC higher were 2 things she got caught out on.

(Of course, we don't know why she "had" to sell at such as loss...)

And there are probably plenty of stories where people did wonderfully from OTP.
 
unfortunately a lot people get told that this apartment SHOULD rent at $XXX per week, but forget that a sales person is telling them, often the sales person hasn't a clue and naturally wants to make the deal sound as good as possible,

so just for arguments say, we'll say a $300k apartment at 6% at $346per week,

but since they are new apartments, you've got bodycorp which can be anywhere between (in my experience) $3000-$5000, so thats up to $100 per week, so essentially, you need to do your maths at a minimum of $246 per week, + other expenses and you are already at 4.2% return!

I almost fell for this once until Yman pointed it out to me
 
You mean I shouldn't trust a salesperson with a vested interest? Wow, learn something new every day! :p

Sometimes hard to see the sausage when they're selling the sizzle. (Or something :D)
 
.. so just for arguments say, we'll say a $300k apartment at 6% at $346per week,

but since they are new apartments, you've got bodycorp which can be anywhere between (in my experience) $3000-$5000, so thats up to $100 per week, so essentially, you need to do your maths at a minimum of $246 per week, + other expenses and you are already at 4.2% return!

What the OP also needs to remember is that the PM takes their letting and management fees off the gross rent and then you pay OC levies, rates etc.

When I lived in the UK I bought two Central Equity OTP units, believing the promises. I bought the first in 2000 and sold it in 2007 for more or less what I paid, the net yield while I owned it being about 3%. I bought the other in 2003 and now would probably get back what I paid; net yield about 3.3% just starting to rise. The upside was that this forced me to overpay the mortgages as fast as I could so when I was ready to buy my PPOR here in Docklands I had a good track record with CBA.
 
When I lived in the UK I bought two Central Equity OTP units, believing the promises.

Tony, can I ask why you bought the second one? Three years had passed, didn't you do the sums then and see what it was costing you out of pocket and that it hadn't grown much?

Gools
 
Hi velli,

Having bought a few OTP's myself, all I can say is due dillegence. There are good ones and there are bad ones.

The Body Corporate Fees are where most new investors get stung.

As far as the rent is concerned, research what 1BR's are renting for and go onto Realestate.com.au and research how many are for rent in that area.

Once you have the right information you can make an informed decision. :)

Regards JO
 
many buyers have bought off the plan and lost money from CE projects. I think Southbank One which has just been released is now selling for 630K for a 2 bedroom. A bit expensive if you asked me.

But the secondary market from CE projects has an opportunity to purchase value added units.
 
Top