IP - 2 bdr unit - 1970s block - Inner West

[dajackal]

Hi, I am just starting out and want to purchase my first IP in the inner west of Sydney. I've inspected a few places and I think I'm in a position to make an offer on a 2 bdr unit.

Can anyone shed their experiences on whether this particular unit is a worthwhile investment? I am aiming for maximum capital growth.

Based on my reading, these were the main criterion satisfied on selecting this unit:
-purchase unit as close to the median price as possible
-purchase unit as close to transport and amenities as possible, yet on a side street as to avoid noise
-purchase unit with < 12 units in same building
-potential for reno's to boost returns

However, these are some of the points I am most concerned about:

-Owner occupier appeal. The building and surrounds are a little run down. On the property, the fence on one side has fallen over and there is rubbish on the ground. On the street there are shopping carts left on street. Some of the houses on the street have been left to fend off the forces of nature on their own. Although this suburb is undergoing gentrification, it does not appear to have hit for this street and a couple of neighboring streets.

-Whether there are any other general pitfalls with investing in an older 1970s style block...since I intend to adopt the buy and hold strategy


Some stats for this particular unit:
$300k asking price
Currently tenanted for $270/wk
5 mins walk to station
2 mins walk to woolies

Thanks for reading =)

 

[yo yo ma]

Hi dajackal
I am unsure of this market so can't comment on that. I would recommend having a look at the minutes of the strata meetings to see how the figures are looking in the sinking fund & if there are any upcoming special levies. This will give you an idea of the maintenance issues. Also check out what the strata fees are.
Steve

 

[Tizzy]

Hi dajackal, we also bought a 70's built 2 bed unit quite recently. Although we don't usually go for units at all, this was a necessary purchase to house an elderly relative. So we went for ease of access, no steps and ground floor in a small block. One of the things we considered of high importance was the state of the building and grounds, but really that was because the particular relative is a fussy old biddy.

We rejected another unit in a run down block in Claremont because of the high number of elderly tenants (possibly fixed income/not inclined to improve grounds) even though that unit could have been improved internally.

As you are buying and holding, the trade off is whether or not you can still rent the unit out easily enough and not be too concerned about a lack of funding to do any major repairs. But if you are only talking straighten a fence (responsibility shared with neighbours) and rubbish removal (council/ skipbins?/trolley contractors?) then dealing with those inconveniences tends to take a bit of time and not a lot of money. It might be that the body corporate is not very active and if you are prepared to get involved you might "clean up" in more ways than one Why not see if you can access the minutes for the past year or two to see who has been attending and what the culture of the BC is.

PS. Not sure if it is just the unit we bought or not but our carparking space and our enclosed patio area ( and each balcony on 10 of the 12 units) are NOT included on the individual titles. Maybe check exactly what your title includes and if there are any major BC costs coming up.

 

[ermen]

strata minutes

is there a way to obtain the minutes without having to buy a strata report?

 

[TheCamel]

you would assume that if you were an interested buyer, the REA would get your access to the strata doco

 

[MIZBUF]

I have not done this recently but I just go to the office of the Strata managers ,making an appointment first and they lay out the minutes book/records for me to go through./search. from memory I paid a fee- Just phone the strata managers and ask for appointment -this is what those strata search service co's do- and charge much more- to you. what suburb is the apartment /might help us assess "gentrification'' potential.

 

[dajackal]

Thanks guy for your insights. I'll call up the REA and see if i can get a hold of the minutes from the strata meetings.

If I do opt to purchase a strata report, from where do I obtain it, and for someone that hasn't seen one before, how am I able to evaluate it?

Hi MIZBUF, the suburb in question is marrickville. I've read two articles from two separate property magazines that have mentioned marrickville as a good place to invest as it is currently undergoing gentrification. The avg. annual growth in the past 10 years is also pretty impressive.

The property in question is located on the south side of marrickville.

Regards,

JC

 

[Rebecca V1.0]

Hi dajackal

I'm really interested to read this.
I'm just getting started too, but wont be in a position to purchase until next year. I have been drawn to exactly the same area and that enclave of 70's units in south Marrickville for much the same reasons as you.

I also have been a tenent in the inner west (Dulwich Hill, Petersham, Newtown) for the 5 years I've been in Aus, so want to make my first property in the area as I know it so well, better SANF for me. I can also vouch for the gentrification potential myself, I was living in Newtown for the cosmopolitan lifestyle before the rent hikes forced me to look further towards Marrickville for better value for my rental $. I went to Rockdale instead but several of my friends have gone to Marrickville and I really like the area.

I'm thinking of moving in for 6 months to get my FHOG and do a bit of reno.

I'll be really interested to hear how you go

Rebecca

 

[dajackal]

Hi Rebecca,

Thanks for your feedback. It's been a great comfort to know that there is demand for people such as yourself to live in the area. What specifically drew you towards the 70's units in South Marrickville? Are there any pitfalls with investing in an older block? Will there still be owner-occupier demand in the future, when the building becomes 40, 50, 60 years old?

What are your thoughts on North Marrickville or West Marrickville, on the border of Dulwich Hill? There are some units within 5 minutes walk to Dulwich Hill Station which seem newer, yet still quite affordable.

As for the latest updates - I've made an offer for 15% under the asking price which was flat out rejected. =(

JC

 

[depreciator]

What street, JC?
Some of those pockets of 70s units in Marrickville aren't great.
Scattered around the suburb (and Dulwich Hill) there are a few are deco buildings. Not sure how often flats in them come up for sale. I prefer them to the 70s ones - more character.
Marrickville's unit price has been going up of late, but I think that's largely because of the new stock that has come onto the market. I'm not sure whether the older stock has been going up.
Good suburb, though. Gentrifying nicely.

 

[dajackal]

Hi depreciator,

The one I'm looking at the moment is on Harnett St., off Illawarra. Here is the link to the listing on domain:
http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2006542819

I've also inspected a few on neighboring streets such as Glen St, Henson St, View St, and Hill St. There doesn't appear that there is much development activity in these streets. There are a couple of newer looking flats, but the majority are 70s style. Comparing the property on Harnett St to the ones on neighboring streets, I feel that this one has the best potential for growth due to proximity to shopping and the train station.

I'll definitely keep a look out for deco buildings.

JC

 

[Rebecca V1.0]

I agree with Depreciator about the art deco units, just look at this renovated one Very nice

dajackal - In terms of demand 20 years down the line as the building ages, I don't feel it should be a problem if the strata maintains the building well and it ages gracefully in the same way alot of the art deco ones have. For instance this one currently being let out on Harnett looks like a great building.

Obviously I haven't been to the viewings yet as that is my next step (still trying to motivate my wife into action at the moment) so I may be over confident, but as you say stick with the ones nearer to the transport, shops etc and check out the strata and surely you'll be covered.

Yes there are very similar apts in Dulwich Hill. The only reason I lean towards Marrickville is that I feel DH will progress on the back of Marrickville not the other way round. When I lived there nobody ever new where it was! I had to explain "its just past Marrickville"

What do you think having had a nose around these apts?

Rebecca

 

[depreciator]

Harnett/View/Henson/Hill (top end) aren't bad. I think the key to units in these streets is finding ones that aren't surrounded by other units. From memory, there are a few blocks that have houses around them.
On the corner of Hill and Henson Streets there is a good block that would have a great outlook I reckon.
Look on a map at the triangle formed where Hill Street meets Illawarra Road. Lots of units in that triangle. Don't go there. There are also a few bleak pockets around the station. South of Dulwich Hill station there are some bad pockets, too.
I only know these places because they are on a short cut I take sometimes.

 

[dajackal]

Great to get feedback from an insider =) Thanks heaps. So you're saying the units on the corner of Hill Street and Illawarra Road are no good because there are too many units? I inspected a top floor 2 bedroom unit which I thought was fantastic - quite new, well maintained, great view from balcony etc. But then I figured that there is less scarcity value as there are like 4 blocks within the same compound. Is this consistent with your thinking, or is there another reason?

What do you think about North of Marrickville Road? Transport options are a little more limited but it'll be adjacent to Petersham, Stanmore, Enmore which are well established areas.

How much of a premium should deco units be fetching?

 

[depreciator]

I think the problem with that triangle bounded by Hill Street and Illawarra Road is that:

there are like 4 blocks within the same compound.

I don't like that compound thing. Further up Illawarra road on the left there is another compound - I often see cop cars outside. The one up the hill may even be public housing. It's a bad design - lots of internal lanes. The one you're looking at is better. I often see piles of furniture outsode on the street, though. Which is odd.

Re: North of Marrickville Road. It depends how far north. I reckon a brisk 10 minutes walk to the station is as far as you want to be if you want transport to be a feature for tenants.

Not sure of the premium for art deco. There definitely is one, though. The good thing about them is that they are nearly always just 2 storey and often not surrounded by other units.

 

[dajackal]

hi depreciator,

Thanks again. I think I'm starting to get my head around this whole property thing.

Can I just ask - what sort of a premium should a lock-up-garage be fetching over an identical unit with only off-street registered parking?

More specifically, the lock-up-garage is 21 sqm and there is alot of functional space that can be used for storage and the like.

 

[depreciator]

Not sure.

A local agent would know off the top of his head. That would be an easy question for them.

Garages become more valuable in certain areas, too. It would be directly proportional to the local parking. A garage in Newtown would fetch more proportionately that one in Stanmore. And a garage in, say Leichhardt near Norton Street would fetch more than one at the northern end of Leichhardt.