Is a block of units a good investment?

http://www.realestate.com.au/property-unitblock-nsw-drummoyne-113229411

I would be grateful for your opinions on this property as an investment.

It is expected to sell for about 2 mil.

Currently rented for about 1500 gross return per week.

Located close to CBD in an area with good CG potential and past history. Good rental demand in this area.

I pay only one set of transaction costs.

Some problems: very old property - could require costly maintenance issues.

Would be negatively geared which could cause problems if there was disruption to my income.


I am thinking of buying, holding and selling later with a view to CG. There should be further room to renovate the interiors with painting and flooring to increase rent and resale price?

I am thinking of borrowing against my PPOR for deposit and the rest against the property, therefore, effectively borrowing 100% secured against two properties with no cross collateralisation.
 
I would be more interested in the additional 2x2br residence plans and ability to get through council. Good equity boosters.

Also 1500pw gross rent seems low?
 
$2m for an investment returning 1500/wk with need for maintenance, managing lots of tenants etc sounds terrible to me.

i cant imagine it would be all that hard to find a commercial property for $2m that would return at the very least 3500/week, that is a difference of $100k/year in your pocket and with a lot less hassle

arent you trying to get income to enable you to retire? rubbish yields like this wont do that.

1500/week does seem low though, is that accurate?
 
I think 1500 return is crap, if you got 2m to spend just go and buy 2x 2m commercial property's or 1x 2m property cash should give you $150k in return for each.
 
Clearly yield is not fantastic yes but what if its not a yield play and a CG play?

Is that what this is?

Is there a DA for the additional units or simply drawings that the Architect has done?

Regards

Shahin
 
Clearly yield is not fantastic yes but what if its not a yield play and a CG play?

Is that what this is?

Is there a DA for the additional units or simply drawings that the Architect has done?

Regards

Shahin

China has long spoken of the need to create 100k passive income so that he can quit his job. With that in mind this is a terrible investment for someone with more then $1m cash in the bank
 
In addition to the DA- is it possible to strata the units? That could increase the value substantially. It possible that this, if possible, may have been beyond the vendor's financial resources. More possible though that it's not worth doing, but worth checking.
 
Another option

I saw this one in my suburb and because it's my real estate I asked them about it.

http://www.domain.com.au/Property/For-Sale/Apartment-Unit-Flat/NSW/Earlwood/?adid=2010096410

Asking $1million but rent income seems low - $55Kish. I wonder why the owners haven't tried to strata it too?

You'd need to spend money on updating it and probably throw out the old tenants since that rent seems out of date and get some new fresh younger types who are getting slightly priced out of Marrickville!

I would be interested but think it could be out of my league as a first investment property project!
 
When you compare that to one property I know of up here for sale up the road from the University of Queensland which is a registered 22 bedroom boarding house costing 1.3mil and bringing in around about 200k per year, the return on units doesn't look so good. Management of a boarding house is a bit more involved though but for $700 000 less than the units you are looking at and a rental return of $128 000 per year more I think it would be worth the effort.
 
Currently rented for about 1500 gross return per week.

Firstly, how do you get to 1500 pw? That averages out to 375 pw for each unit, which seems low for a 2 bedroom unit in Sydney, let alone a 3 bedroom. I don't know the area, but would have thought the average gross rent per unit would have been quite a bit higher.

Leaving that aside, for somebody in your position I couldn't think of a less appropriate investment.

4 lots of hassle, and low rent - and you don't need the high leverage (only benefit of RIP) given you had a decent amount of the required capital.

I'd look at a decent diversified share portfolio for income (or AFI, ARG, MLT etc..) and / or commercial property.
 
When you compare that to one property I know of up here for sale up the road from the University of Queensland which is a registered 22 bedroom boarding house costing 1.3mil and bringing in around about 200k per year, the return on units doesn't look so good. Management of a boarding house is a bit more involved though but for $700 000 less than the units you are looking at and a rental return of $128 000 per year more I think it would be worth the effort.

That's true. I'm looking at buying a boarding house - I already lease two of them. The returns are crazy - but you have to factor in that unless you have live in managers or staff those returns are also covering a wage. I could theoretically have a full time job on top of running the the boarding houses and I know many do, but I actually do the hands on stuff myself as a job. Profits stay higher the more hands and on I am so it's all a trade-off of what you want to do. I know a guy with 100 boarding houses and hostels who doesn't every visit them anymore despite starting off in my position. He does have a lot of staff, both paid and unpaid (room in return for cleaning etc).

Anyway if you spot any good boarding houses for sale let me know!!
 
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Id guess closer to 2.6.


I am thinking of borrowing against my PPOR for deposit and the rest against the property, therefore, effectively borrowing 100% secured against two properties with no cross collateralisation.


20 % + costs on PPOR, plus buffer ( so take an 80 % facility if you can)
Stamps at 120 000+ :)


80% lend with resi rates on the block. Note most lenders wont do more than 65 to 70 % and will skin you on comm. rate as well. Adelaide Bank via a Mortgage Manager should do at 80 % with a nice 3 year or 5 year fixed rate AND 100 % real offset.

Free Bonus advice:

Use the variable buffer in the PPOR as a fixed rate hedge if variable rates continue to fall.

Do not try this at home or with CBA, chemical burns are likely

ta
rolf
 
Thank you everyone for all your insights and ideas.

As a total novice, I am sincerely appreciative.

I get the idea from the collective view that I should not and therefore will not proceed with this block of units.

Back to the search.
 
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