How to value unit block?

[TMNT]

Was wondering how would you value this particular unit block,

Med Fairly large regional town
8 x 1 bdr units
Very few units blocks have sold over the years
Medium demand for sales of single bar dwellings
One title
All units poor condition, rentable but need a make over

Bidding to start at 500k

2 bedroom units sell for 120k each

The problem being faced is very few unit block or individual sales
Not the greatest demand, yield individually would be good say 9%ish
Single title, the possibility of strata ING is unknown since nobody knows anything about the walls etc.

Is there a magic formula that people follow for valuing unit blocks?

This one is hard because of it being new in many aspects,

My aim is to buy and hold and enjoy the cg, and if I can strata it, successfully and cost effectively, that may boost value of the block by 20% for example

Or do people who have no intention of strataing don't care whether its possible to strata or not?

Thanks everyone

 

[Aaron_C]

It's basically what they're worth individually, less 15%.

 

[tobe]

I would value it as a commercial security myself. that is Id value it based on current yield, benchmarked against similar.

So, if units in medium region towns usually yield 8%, Id find out what these particular units are renting for per week and work back from there, with a bit of a discount for good measure.

 

[nhg]

Also not every block can be strata-titled. Depends on the council. You will want to be 100% sure of that before the auction.

 

[chilliblue]

Agree with the 15% lower than what a comparable strata unit would sell for.

Remember to check with your bank if having to seek finance that they will lend monies for that suburb and what their terms and rates are.

 

[Andrew_A]

I would value it as a commercial security myself. that is Id value it based on current yield, benchmarked against similar.

So, if units in medium region towns usually yield 8%, Id find out what these particular units are renting for per week and work back from there, with a bit of a discount for good measure.

Yes this would be my first method as well, also a careful consideration of the land value.

 

[TMNT]

I would value it as a commercial security myself. that is Id value it based on current yield, benchmarked against similar.

So, if units in medium region towns usually yield 8%, Id find out what these particular units are renting for per week and work back from there, with a bit of a discount for good measure.

Ok, since commercial is not my strength, how would this work,

Land size 1300 sqm, land worth $90k odd

Yield: assume 170 per week, @ 100k each, that's 8.8%

At 100k each x 8 minus 15% =680k (assuming it can be strataed )

Seems a bit expensive considering land is fairly cheap

I feel like I could rebuild it for 80k per dwelling x8 +90k =730k for 8 brand new dwellings,

I'm quite confused now

 

[Scott No Mates]

Your numbers are slightly off the mark. You've discounted the strata unit cost from $120k to $100k already but playing with your numbers:

$170*8*52 wks / 8% yield = $884k

or check:

$120k x 8 - 15% (for non-strata) = $835,000

or

$90k land + 8*$80000 *20% development margin = $876,000

 

[RightValue]

$170 * 8 * 48 = $65,280


For a gross yield.

Capitalise at 9% - if that is the market norm (you divide the income by 9%) = $725k rounded.

From this you will want to deduct any expected costs to bring it up to rentable standard.

In a regional area a 4 week vacancy allowance may not be enough.

Sometimes these properties can be a good buy at a very attractive yield.

If you have lots of expenses you may want to look at the income on a net basis after expenses such as rates and property management and land tax are accounted for.

 

[tobe]

another method might be to value the property as land value plus what it would cost to replace the building, ie, what an insurance company would like you insured for. again, you would want a discount from this price, but it gives you a ballpark.

 

[TMNT]

thanks everyone, going to recrunch a few numbers

so how would opinions change that you couldnt strata it for either council reasons or it would basically be stupidly astronomical?