But me no buts. I'm done talking.
Strata report issue - Should I buy this investment property - advice please?
- Thread starter Novice100
- Start date
But me no buts. I'm done talking.
you say you will not get involved in the strata discussions/decisions??
but as an owner you will be responsible for paying any related costs of those strata discussions/decisions.
are you willing and able to fund potential high and ongoing costs related to this property and its problems?
if so ok. perhaps you have deep pockets and unlimited funds?
like the others i would not buy the property. plenty of others out there.
but as an owner you will be responsible for paying any related costs of those strata discussions/decisions.
are you willing and able to fund potential high and ongoing costs related to this property and its problems?
if so ok. perhaps you have deep pockets and unlimited funds?
like the others i would not buy the property. plenty of others out there.
What makes you think the legal fees would ta deductible? Probably would be a capital expenses and only come off CG when sold - make sure you get tax advise before assuming this.
Rust never sleeps! I should know, I work each and every day battling the stuff! No matter how good anyone is at corrosion protection, in a residential apartment, crawling through wall spaces and roof cavities, using the best of the best products - you will never 100% get it all.
Run a mile!
Pinkboy
Run a mile!
Pinkboy
I've had an idea... if i wait a while, someone else in the complex (there are 105 units) may want to sell at a big discount....
if i sent out some direct mailshots outlining the strata issues to every unit (which i think many of the residents may be unaware of because there are a lot of older people in the complex) and offering to buy for $600k, perhaps someone might wish to sell at this price?? ...the reduced price would easily compensate me for any later potential cost
if i sent out some direct mailshots outlining the strata issues to every unit (which i think many of the residents may be unaware of because there are a lot of older people in the complex) and offering to buy for $600k, perhaps someone might wish to sell at this price?? ...the reduced price would easily compensate me for any later potential cost
We bought a unit in the eastern suburbs in 06 that had water penetration issues and we were told we're covered under the 7 year warranty. As far as price goes we got it for 70-80k under what it wouldve been worth without those issues. As it was our PPR we thought it was worth the price reduction and it would all get sorted soon enough. Just before we settled, the second engineers report was compiled for the insurer. Works finally commenced in jan 09. In that time there were multiple special strata meetings and special levies struck. While we weren't liable for the costs of the remediation works we still had to pay for a project manager and legal fees which ended up being a few K out of pocket. We were in a 75 unit complex. As for inconvenience, there was much. Some days unable to get your car in/out of the carpark and the weeks of grinding of concrete/metal while the works were taking place. There weren't many units from where we couldn't hear the noise from our unit. In july09 we had a baby and works had only just started on our place. We moved out in the February after and rented it out. Defect works weren't completed properly and still some water leaks detected that remediation company won't fix as they can't find the source of the problem.
Would you like your mum to live through that for 3 years? Not to mention living with the defects up until they are fixed? At the point when we bought we thought it would be fine as we were living there ourselves and no expense out of our pocket. Yet nearly 6 years later it's still going and we have ourselves a unit with water issues, tenants who r not happy and we r unable to increase the rent as the property is not to the standard it should be.
So now you have an answer from someone who's done it. Did it work at all for us? Well we've probably made over 200k CG in 6 years which is ok for a unit we paid just over 500k for. But having to replace nearly all our furniture and belongings due to mould was not fun, as was living through the majority of the works, or now having to deal with the property manager calling us every time it rains to ask when the walls are going to b fixed and the strata manager telling us there is nothing she can do.
In the end it's your choice but if I was your mum I'd be pretty cranky if u put me in a substandard unit.
Would you like your mum to live through that for 3 years? Not to mention living with the defects up until they are fixed? At the point when we bought we thought it would be fine as we were living there ourselves and no expense out of our pocket. Yet nearly 6 years later it's still going and we have ourselves a unit with water issues, tenants who r not happy and we r unable to increase the rent as the property is not to the standard it should be.
So now you have an answer from someone who's done it. Did it work at all for us? Well we've probably made over 200k CG in 6 years which is ok for a unit we paid just over 500k for. But having to replace nearly all our furniture and belongings due to mould was not fun, as was living through the majority of the works, or now having to deal with the property manager calling us every time it rains to ask when the walls are going to b fixed and the strata manager telling us there is nothing she can do.
In the end it's your choice but if I was your mum I'd be pretty cranky if u put me in a substandard unit.
step 1 - work out that your inexperience may lead to hasty decisions and potentially costly errors
step 2 - find out who you can get to help you
step 3 - call him/her
the fact that after repeated warnings you are still leaving the door open to possibly purchase it is crazy. you mentioned one unit sold for 650k recently BEFORE this problem was known, how on earth would the unit youre talking about be worth MORE (assuming they are comparable)?
step 2 - find out who you can get to help you
step 3 - call him/her
the fact that after repeated warnings you are still leaving the door open to possibly purchase it is crazy. you mentioned one unit sold for 650k recently BEFORE this problem was known, how on earth would the unit youre talking about be worth MORE (assuming they are comparable)?
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Novice100 I am not sure why you bothered to post on this forum.
It appears to me that despite the quality advice provided by a multitude of very experienced real estate investors and professionals to run a mile, you still have your mind made up to purchase a unit in this complex which has major faults.
Do what you need / want to do but if you don't want to listen to advice that you have asked for, please don't continue to post!!
It appears to me that despite the quality advice provided by a multitude of very experienced real estate investors and professionals to run a mile, you still have your mind made up to purchase a unit in this complex which has major faults.
Do what you need / want to do but if you don't want to listen to advice that you have asked for, please don't continue to post!!
i may have been unclear earlier - the unit that sold for 650k was AFTER this issue was known about - the issue has been identified more than 18 month agos and numerous units in the complex have sold since the issue arose at increasing prices each time - however the legal action started in Dec 2011 AFTER the last unit was sold
as far as i can tell this issue has NOT yet affected actual achieved selling prices in the complex - i spoke to 2 owners both of whom said that they knew about the issue and it did not deter them from buying into the complex
also, there is another offer on the table for this unit at a similar price level to mine at the moment
i AM listening to the posts and appreciate that many posters may be very experienced - however, nobody has actually given a specific reason why the property should not be purchased if the price was lowered, apart from beachgurls post which in fact shows it can be done profitably if you can put up with the pain of living through repairs - in this case the repairs are not actually near the unit I would be buying they would be on the other side of the complex i.e a whole block away
is everyone saying that this property should not be bought regardless of how low the price is? - this doesn’t make sense to me and I’d be grateful for any specific explanation why not
also, much of the negative sentiment is based upon the possibility of the legal case failing but it may not fail and a calculated risk is a reasonable thing to take if you go into it with eyes wide open
There have been plenty of specific reasons given by various people, which you appear to gloss over. As I said before, you appear to have already made your mind up and are looking for someone to rubber stamp your thought process.
We await your second thread, titled "Help I have a 50k special levy and I cannot sell"
Been following this post and it really is amazing how you have ignored the reasons everyone has written in here. You have professional, experienced investors giving you free advice, but from your first post you've already made up your mind.
Just do some calculations, assume the lawyer fees and costs to fix everything, and take that off your offer. And buy it. At the end of the day that's what you've always wanted.
It appears to me you're trying to find someone that can post something successful about a purchase like this, so you can find another reason to buy it. Don't wait for it, just buy it.
good luck with whatever you decide
Just do some calculations, assume the lawyer fees and costs to fix everything, and take that off your offer. And buy it. At the end of the day that's what you've always wanted.
It appears to me you're trying to find someone that can post something successful about a purchase like this, so you can find another reason to buy it. Don't wait for it, just buy it.
good luck with whatever you decide
Also consider that while you may be able to discount the buy price, when it comes to the special levies being paid, thats money that you have to find from your own pocket and not from the lender.
You may be able to do a reval/redraw to pay the levy assuming you have enough equity to do so, but consider that if there is a levy of say $50k per lot, people may start fire sales to get out and discount heavily, which will drag down your valuation and may erode any equity you have. Leaving you to stump up the cash, again from your own pocket.
You may be able to do a reval/redraw to pay the levy assuming you have enough equity to do so, but consider that if there is a levy of say $50k per lot, people may start fire sales to get out and discount heavily, which will drag down your valuation and may erode any equity you have. Leaving you to stump up the cash, again from your own pocket.
I am not going to buy now - but will wait and see what happens to asking prices and the legal case over the next few months
but from an academic point of view i still have the suspicion that buying could work - from comments so far i would summarise:
Reasons not to buy:
- image of property may be tainted in investors eyes (but i don't think this matters in the long-term and i would be buying for the long-term)
- legal case might fail leading to special levies which could amount to many tens of thousands of $ (but my conservative estimate is that it would not cost more than $20k per unit if the case fails)
- inconvenience of having to live through the repairs
- potential for cost blow out in legal/repair fees
- potential for property price to fall due to owner financial stress leading to fire sale - but this is a very upmarket complex and my impression is that the majority of residents/owners are quite wealthy, also this would affect the short term price and not the long term pricing, i can afford to cover any potential special levy without borrowing)
- potential for insurance companies to weasel out of paying in the event of a fire claim due to identified failures to meet safety regulations
Reason why buying might work
- it might be possible to factor in the costs of potential repairs into the buying price
- recent sales have not been affected by this issue (this seems to me to be an important empirical fact as opposed to most of the other points which are theoretical concerns)
- there appears to be strong demand for units in this complex (there has only been 1 open home so far, following which 2 strong offers have been made including mine)
- it seems that the builders should be liable and have a significant chance of losing the case
- the unit for sale will not be greatly impacted on a day to day basis by potential repairs due to location
but from an academic point of view i still have the suspicion that buying could work - from comments so far i would summarise:
Reasons not to buy:
- image of property may be tainted in investors eyes (but i don't think this matters in the long-term and i would be buying for the long-term)
- legal case might fail leading to special levies which could amount to many tens of thousands of $ (but my conservative estimate is that it would not cost more than $20k per unit if the case fails)
- inconvenience of having to live through the repairs
- potential for cost blow out in legal/repair fees
- potential for property price to fall due to owner financial stress leading to fire sale - but this is a very upmarket complex and my impression is that the majority of residents/owners are quite wealthy, also this would affect the short term price and not the long term pricing, i can afford to cover any potential special levy without borrowing)
- potential for insurance companies to weasel out of paying in the event of a fire claim due to identified failures to meet safety regulations
Reason why buying might work
- it might be possible to factor in the costs of potential repairs into the buying price
- recent sales have not been affected by this issue (this seems to me to be an important empirical fact as opposed to most of the other points which are theoretical concerns)
- there appears to be strong demand for units in this complex (there has only been 1 open home so far, following which 2 strong offers have been made including mine)
- it seems that the builders should be liable and have a significant chance of losing the case
- the unit for sale will not be greatly impacted on a day to day basis by potential repairs due to location
Update!
I have spoken with the agent who has indicated the following
1. He has confirmed that there is no current legal action happening. The steel corrosion issues have been reported to the builders within the warranty period and are being investigated. The strata meeting minutes refer to an agreement to hire lawyers IF the builders try to resist fixing the problem
2. The builders are reputable builders and are still around and still actively addressing all previous issues with the building
3. The vendor is willing to cordon off a sum of money (to be negotiated) in a trust to be held for 12 months (or a different period of time to be negotiated) which will be used to pay for any Special Levies that might be raised in that period relating to the steel corrosion issue
- this would cover me against paying any special levies
4. he says that the strata reports tends to exaggerate potential costs of problems in order to cover themselves from being liable if they underestimate costs
point 2 above seems to act as good compensation for the issues reported - does anyone think it is reasonable to proceed with this new clause and if so, how much money and for how long should be cordoned off?
I have spoken with the agent who has indicated the following
1. He has confirmed that there is no current legal action happening. The steel corrosion issues have been reported to the builders within the warranty period and are being investigated. The strata meeting minutes refer to an agreement to hire lawyers IF the builders try to resist fixing the problem
2. The builders are reputable builders and are still around and still actively addressing all previous issues with the building
3. The vendor is willing to cordon off a sum of money (to be negotiated) in a trust to be held for 12 months (or a different period of time to be negotiated) which will be used to pay for any Special Levies that might be raised in that period relating to the steel corrosion issue
- this would cover me against paying any special levies
4. he says that the strata reports tends to exaggerate potential costs of problems in order to cover themselves from being liable if they underestimate costs
point 2 above seems to act as good compensation for the issues reported - does anyone think it is reasonable to proceed with this new clause and if so, how much money and for how long should be cordoned off?
