older units in inner city suburbs ....

[RedApple]

Hi everyone,

I'm considering buying a 2br apartment unit that's about 40 years old because that's all my budget could afford for an IP in the inner sydney suburbs.

However the following thoughts have been bugging me:

Since old houses appreciate in value because of the land component (can get knocked down to have a new one built on the land but the same can't be done to a single unit in a building. ) can unit growth diminish when they reach certain age and hence become less profitable to invest in simply because the building is becoming less useful (for tenants/buyers)?

Please tell me:
-How long do brick unit buildings often last before they get teared down ?
-What generally happens to these buildings when they get "old" ? Since the unit owner only owns part of the land it sits on what options do they have when the building becomes too old to maintain ? And once the building gets demolished what does the unit owner get for their share of the land underneath ?

 

[Propertunity]

....is there a certain age for units when their value growth diminishes and hence become less profitable to invest in simply because the building is becoming less useful (for tenants/buyers)?

This is hard to tell because some of the Art Deco era i.e. 1920/1930's for example, are still in high demand from tenants/buyers today and they're 90+ years old with building depreciation long gone.

And once the building gets demolished what does the unit owner get for their share of the land underneath ?

All you have to do is get the body corp to vote to sell to a developer (who is probably going to amalgamate 2 -3 sites together and build a bigger complex). If there were, say, 9 unit holders, then they would all receive one ninth of the sale value (if all units were held in equal shares).
It is not really an issue.

 

[Tony3008]

All you have to do is get the body corp to vote to sell to a developer (who is probably going to amalgamate 2 -3 sites together and build a bigger complex). If there were, say, 9 unit holders, then they would all receive one ninth of the sale value (if all units were held in equal shares).
It is not really an issue.

Is there a mechanism for forcing an individual owner to sell his interest? Suppose your block of 9 sits on a generous plot which for redevelopment is worth far more per unit than the units as units and one owner is not interested in selling whatever the price?

 

[Ed Barton]

Is there a mechanism for forcing an individual owner to sell his interest? Suppose your block of 9 sits on a generous plot which for redevelopment is worth far more per unit than the units as units and one owner is not interested in selling whatever the price?

yes. a heavy metal pipe and a burly motorcycle rider called bazza.

 

[b simpson]

An old girlfriend owned a unit in a complex of 4 in Ashfield. It was a big block with heaps of wasted space having a 4 car garage down the back.

The block of flats on one side was 3 stories high with underground carpark probably about 17 units.

I tried to convince her to get the owners to sell to a developer and put a similar sized block there but as most of the owners were old and lived there for many years they likely wouldn't like the change.

Shame really, she paid about $280k for her really old unit (12 foot ceilings) would have been a nice little earn if they put 17 on it. Great location walk to station etc...

 

[kkrp]

I agree it really is to hard to tell re your first question.

Body Corpprate will vote re selling to a developer and owners would split the profits.

 

[Propertunity]

Is there a mechanism for forcing an individual owner to sell his interest?

I don't know for absolute certain, but I suspect not. The government can forcibly aquire your property but I am not sure that a corporation can.

This is why you occassionally see the BC of one block of units buy (at market) one unit in a nearby unit block, as a strategic move either against developers or as a way of extracting more money from developers in future.

 

[RedApple]

Thanks Propertunity

This is hard to tell because some of the Art Deco era i.e. 1920/1930's for example, are still in high demand from tenants/buyers today and they're 90+ years old with building depreciation long gone.

All you have to do is get the body corp to vote to sell to a developer (who is probably going to amalgamate 2 -3 sites together and build a bigger complex). If there were, say, 9 unit holders, then they would all receive one ninth of the sale value (if all units were held in equal shares).
It is not really an issue.

 

[RedApple]

Hi b simpson, how old was that unit ?

Say if the majority of the owners wanted to sell but one or few don't would
body corp still go ahead and sell the entire unit block ?

An old girlfriend owned a unit in a complex of 4 in Ashfield. It was a big block with heaps of wasted space having a 4 car garage down the back.

The block of flats on one side was 3 stories high with underground carpark probably about 17 units.

I tried to convince her to get the owners to sell to a developer and put a similar sized block there but as most of the owners were old and lived there for many years they likely wouldn't like the change.

Shame really, she paid about $280k for her really old unit (12 foot ceilings) would have been a nice little earn if they put 17 on it. Great location walk to station etc...

 

[RedApple]

Hi kkrp,

I've been thinking about this question since if one buys an old unit and not long after, majority of the unit owners vote to sell the entire building before this newly purchased unit has had any increase in equity then wouldn't that recent owner subsequently make a lost ? (due to high purchase cost etc...)

what is the normal age for brick unit buildings to get knocked down? i've been looking at some 2br inner melb suburb apartments and was very surprised to find there are quite a few over 80 years+ and still selling for over $1/2 mil

how long does a building live/last ?

I agree it really is to hard to tell re your first question.

Body Corpprate will vote re selling to a developer and owners would split the profits.

 

[Peter Parker]

I've been thinking about this question since if one buys an old unit and not long after, majority of the unit owners vote to sell the entire building before this newly purchased unit has had any increase in equity then wouldn't that recent owner subsequently make a lost ? (due to high purchase cost etc...)

My understanding is that while the simplest body corporate decisions require a simple majority (50% + 1), more significant ones require a higher majority.

And the most significant (eg demolishing the whole building) may require 100%.

So you should be OK.

 

[b simpson]

Hi b simpson, how old was that unit ?

Say if the majority of the owners wanted to sell but one or few don't would
body corp still go ahead and sell the entire unit block ?

At a very rough guestimate I'd say 70 years old. The way to move forward would be to offer to house the owners for the duration of the build and give them a brand new apartment and maybe an extra bedroom each for their support. The existing place is not designed well at all and one owner doesn't even have a garage. Actually I think it has 6 units not 4 still very worthwhile to develop.

Tempted to try and buy an apartment but that would be difficult as it's the kind of place where someone needs to die before a place goes up for sale.

 

[RedApple]

Thanks Spiderman

My understanding is that while the simplest body corporate decisions require a simple majority (50% + 1), more significant ones require a higher majority.

And the most significant (eg demolishing the whole building) may require 100%.

So you should be OK.

 

[RedApple]

wow ... that sounds like a good deal to the existing owners... brand new apartment in exchange for an old unit

At a very rough guestimate I'd say 70 years old. The way to move forward would be to offer to house the owners for the duration of the build and give them a brand new apartment and maybe an extra bedroom each for their support. The existing place is not designed well at all and one owner doesn't even have a garage. Actually I think it has 6 units not 4 still very worthwhile to develop.