Is anyone buying city apartments, how's that go ?

Understand many investors are not keen on city apartments, but my thinking is some are relatively affordable with higher yield, hopefully less maintenance, if in my portfolio has few of those, which may be fully paid for with part of the super(hence without the need to sell or draw down on equity to convert to income when retire), and will have enough yield to cover basic expenses. The growth may not be great ( size > 50m2), but at least without the risk of putting money in shares and find the value drop 40%, and the rent should steadily increasing. Not sure what the capital growth of city apartments (particularly Meblourne & Brisbane) is, could someone share the experience and insights.
 
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My thinking is many city apartments are relatively affordable with higher yield, hopefully less maintenance, if in my portfolio has few of those, which may be fully paid for with part of the super, and will have enough yield to cover basic expenses. The growth may not be great ( size > 50m2), but at least without the risk of putting money in shares and find the value drop 40%, and the rent should steadily increasing. Not sure what the capital growth of city apartments (particularly Meblourne & Brisbane) is, could someone share the experience and insights.

What kind of higher yield are we talking about.
My view is on city apartments that you should be looking more for a commercial type yield or at least somewhere in between.

If the gross yield doesn't at least cover the interest, then something is wrong.
 
. Not sure what the capital growth of city apartments (particularly Meblourne & Brisbane) is, could someone share the experience and insights.

BFree,

Are you talking "near-city" (eg in Melb say Southbank, Docklands, Nth Mel, Carlton) or "right in the CBD" (postcode 3000)?

The Y-man
 
What sort of city apartment? How much is the Body Corp (OC) levy? My Central Equity flat in Dudley Street bought off plan in 2003 would probably now net me what I paid, and delivers a net yield of 3.3%. I have learned my lesson ...
 
BFree,

Are you talking "near-city" (eg in Melb say Southbank, Docklands, Nth Mel, Carlton) or "right in the CBD" (postcode 3000)?

The Y-man
Was thinking the cbd, but no particular area actually, just thought may be an easier way to accumulate/generate sufficient rental income than the mess of keep on borrowing on equity or selling when stop full time work.

What sort of city apartment? How much is the Body Corp (OC) levy? My Central Equity flat in Dudley Street bought off plan in 2003 would probably now net me what I paid, and delivers a net yield of 3.3%. I have learned my lesson ...
Guess your experience wasn't that good.

Haven't been tracking the prices, so am curious any experience, good or bad. I know some people just buy studio apartments, although not game/foolish enough myself.
 
Was thinking the cbd, but no particular area actually, just thought may be an easier way to accumulate/generate sufficient rental income than the mess of keep on borrowing on equity or selling when stop full time work.

Keep in mind that CBD postcodes may have different lending criteria to suburban postcodes (brokers please confirm if this is still the case :)).

When we were looking, some of the lenders would only go to 60% LVR even on some larger floorplans.

Cheers,

The Y-man
 
correct, some lenders restrict LVR/lending based on postcode, floor area, number of dwellings in the block, number of floors in the block, and some restrict the number they will be exposed to in any one development. For instance taking no more than 5 or 10% of the dwellings in a particular development.

There is also a diference between inner city apartments and serviced or student apartments. serviced and student apartments have higher body corp usually, and a higher yield, and are much harder to finance. Inner city apartments might be small but otherwise are the same as ones in the burbs....
 
Hey bornfree - I'm far from a property expert, but my PPoR is a 1 bedder in inner Sydney so I can tell you how that has gone for me.

Bought in Ultimo in 2007 for $390k. Ultimo is right next to Chinatown and the Powerhouse Museum so kind of equivalent to the Docklands in Melbourne. 1 bedder with decent city views (but not harbour or opera house or anything). Decent sized place (about 65m2) plus a car park. Faces NE and has a lap pool on the rooftop. Building was 7 years old at the time.

Was advised 2 years ago I could rent it out for $480-$500/week, not sure if that has moved much since, I suspect not. Just had the bank accept my new valuation of $450k but the banker said they easily accepted it so maybe it could be anything up to even $500k if I got lucky at auction or something. So cap growth has been either ok or pretty good depending on that range.

About 18 months ago I was looking at potential investment units but this was in the middle of the FHOG and the auctions I went to were just ridiculous. Apartments that I guessed would go for about $420k which I already thought were overvalued were going for $470k. Just stupid prices. Not sure what it is like atm.

So - maintenance has been pretty good. I have some bathroom issues with seeping water which is not great but I can keep on top of it by sealing the shower every couple of years (cheap but annoying) I think to properly fix it would be pricey. Apart from that it's fine - all maintenance outside the unit is taken care of by the Strata.

Make sure the strata is well funded with a decent sinking fund and check the latest report for any ongoing building issues or upcoming expenses.

Strata is the killer for many apartments though I think. Mine is about $1,000 a quarter which is fairly significant although by no means unusual for inner Sydney apartments. I would happily forgo my swimming pool, rooftop access and any other features if it would significantly lower my strata. If I bought an investment unit I would be looking for a basic building with low strata over a fancy one with swimming pool/gym/building attendants etc.

Also, car parks for inner city apartments are gold. Definitely a requirement for me in an IP.

Hope that is of use to you!
 
I bought inner city Perth early 2009. I have had 15% growth in that time, but like everywhere, there are markets within markets. The whole city apt sector certainly didn't experience this, in some areas there is a glut and they're not selling, and others there are a shortage. Mostly depends on which part of the city and what amenities are close by.
I live in this one so not tenanted but others in the complex are at anywhere between 5 and 6% gross yield.

Agree that strata fees are a killer, but if you can choose wisely (or luckily?) and offset with CG then its acceptable to me.
 
This is truly my friend and not me.
She just sold a Southbank apartment that she held for 20months. It was 2bedrooms and she said she never had a problem leasing it and she said that she made $200K on the sale. Then she plonked it into another Southbank apartment. This time a 3bedder 2storey one and she is having trouble finding tenants. Granted it is winter and the quiet time of the year. Also I think 2bedders are easier to rent out to professional couples who do not want to do the whole share house thing. Students would be interested but new students are not looking at this time. She's asking for $600 pw on the rent which I think is a little steep for a 3x1x1.

I'm about to call the property manager to see if they are selling the apartment or trying to push me to view another one.
 
... if in my portfolio has few of those, which may be fully paid for with part of the super(hence without the need to sell or draw down on equity to convert to income when retire),

Or you could set up your SMSF to purchase them. When you reach the retirement age you could use the rent for living or sell it and pay no CG at all.



The growth may not be great ( size > 50m2), ... Not sure what the capital growth of city apartments (particularly Meblourne & Brisbane) is, could someone share the experience and insights.

All that stat info can be accessed for free. Just get any of the property investment magazines in circulation. To be more specific you could buy the data also.
I got some in Brissie that doubled in price after 5y and the rent doubled in about 8y.
 
thanks guys for sharing the experience, although I doubt if I will deliberately buy an inner city apartment now, but thinking may be not a bad thing if have couple in the portfolio cheaply with good yields and low maintenance.
 
Just had an agent tell me my apartment is worth $450-$480K, of which I paid $350K 18 months ago. Body Corporate is $2K a year, so I'm happy with it as a home and as an investment.
 
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