Help! Opinions please

[fairydust]

Hi everyone,

This is my very first post and I am hoping to get some opinions. I'm looking to buy my first IP and positive cashflow is my main goal. Get some $ earning that will pay the mortgage itself.

I just found a 1 bedder in West Perth, walking distance to the oxford strip, train station, freeway etc. The last unit opposite sold for 287,600 unfurnished. This place is 46 sqm in a building that's quite old, no pool, facing busy road and oppsite a popular rec centre/public pool. The place Im interested in is 46sqm, city view, fully renovated, and has been renting for $430 pw. The tenants are looking for a bigger place to stay. I had a quick check and other units have been selling for 255K, ground floor non renovated. I was told vacancy rates are 2.2%. A similiar search of 1 bedders around have been sold for 285-290K just round the block.
Shire Rates $761.43
Water Rates $630.50
Strata fees (including sinking fund) $475.00 quarter
They are planning to upgrade the laundry room area and fix some rusty windows across the building.

The owner was asking for high 200Ks like 292,294. I placed an offer for 288K fully furnished. Its now come back as accepted subject to finance approval. I have signed a contract for sale with 10K deposit within 7 days of acceptance.

I thought it was all good until I saw that several are homeswest units (inc the one next door to this unit). I personally wouldnt stay there but thought the rent was pretty good to cover the mortgage given the location and the place done up. Some family members are questioning whether this is a good buy and feel I can do better with both decent cashflow and CG in other areas. I don't have ANY experience and I'm now beginning to question my decision and whether it is/was a rash one?? Your thoughts and opinions?? I would much rather forfeit my 10K than make a bad mortgage decision! There aren't a lot of people to help me so I would appreciate your honest opinions...

THANKS!!!

 

[Shahin_Afarin]

Depends on budget and strategy. If you buy a 46sqm unit you are really amputating any future ability to manufacture some form of CG. Yield is not bad but the strata will always continue to increase and you will have no control over that.

Also think about resale - selling a 46sqm apartment will be difficult considering there are some finance restrictions.

 

[thatbum]

I'm pretty sure I know the complex you are talking about, and even have some idea of which unit it was.

It might come down to whether you think you can achieve the $430/week rent or thereabouts. If you can, then you have your positive cashflow you are after.

It sounds like the problem is that you feel like you don't have any experience and don't feel like you can be confident in your purchase (or any purchase). I'm not sure that is a problem that is specific to this buy - and before offering again, you should probably go out and learn as much as you can so you can feel confident in your decisions to buy.

EDIT: It looks like if its the complex I'm thinking of, its set a new record for sale price. But I suppose its renovated. Shrug - make of that as you will.

 

[marks]

It would more that $10k if you failed to go through with the contract. You could get stung with the difference between the final sale price and what you offered. (plus costs, REA commission, etc.).

I'd engage a solicitor (not just a conveyancer) and finance broker ASAP. There are some great brokers on these forums. Who also may be available Sydney time!
You may have a get out with finance clause but a broker & solicitor can help you with that.

In the meantime, sort out the strategy you want, what are your required outcomes. Did it for 2, 5 and 10yrs at least. There are plenty of posts in these forums on how to do this. Positive cashflow is a strategy, not an outcome.

Be careful who's family advice you'd take. Unless they have a great portfolio of property which you can LEARN from, take the words more as an opinion than advice!
(If they do have a great portfolio, then take pen and paper!)

It sounds like it is a good but not the best buy. Around $40pw +CF?
I'd put it down to a lesson learnt about why positive cash flow is good and its great if you can manufacture value reno, CG and/or development as well.

Cheers.