Units v's houses

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From: Caroline Wilson


HI forum,

I'd appreciate anyones comments on houses vs units or vice verso.

Thanks I'd appreciate it
 
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Reply: 1
From: Michael Croft


Beware land component or lack thereof.
Beware noise transmission.
Beware concrete cancer and rising salt damp in basements/carparking areas.
Beware covenants.
Beware the body corporate fees and sinking funds or lack thereof.
Beware unfinished body corp business.
Beware on site managers.
Beware central heating and cooling plant.
Beware high ratio of renters to owner occupiers.

Others can add more ;-)

Michael Croft
 
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Reply: 1.1
From: J Parker


At least you can bulldoze a house when it gets beyond repair. Houses also have that magical, ever increasing thing called land value, and it's all yours (not just a small section of it).
Cheers, Jacque :)
 
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Reply: 1.1.1
From: Simon and Julie M


Hi there
We are currently trying to lease a nice 1st floor unit in Canberra.
It would normally rent easily however the people in the unit below have decided to start a poultry farm "Chooks".
It should be an interesting problem to solve.
Regards
Simon
 
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Reply: 1.1.1.1
From: J Parker


Pay 'em an incentive (movie tickets, free pizza/red rooster? vouchers!) to give free eggs to your tenants - on the proviso that they keep a limit on the hens and spray eau-de-cologne around daily to get rid of the chooky whiff! Tenants will be eggstatic!
Cheers, Jacque :)
 
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Reply: 1.2
From: Nigel W


Michael, it is with some trepidation that one would seek to joust with someone with your PI experience and building expertise on this forum, however I make the following observations:

On 1/16/02 4:29:00 PM, Michael Croft wrote:
>Beware land component or lack
>thereof.

With older units it can in fact be relative high 30%+. I think there are several aspects of "land component".

The first is "how much?" On houses you win hands down of course. But the second aspect is "Where?".

Would you rather have a one bedder right on Sydney harbour or 10 acres of salt-affected mudflats out the back of burke? Naturally this is a rather spurious example, but I think that you aren't necessarily doing yourself a disservice in trading some land area for superior location -(all of which of course feeds in to the delicate supply and demand equation!)

The other point too, is that for those of us who aren't builders, the reno for units is pretty easy and compartmentalised. As you so routinely prove to the forum, the quickest CG is that you make yourself!

>Beware noise transmission.

If you go for cavity brick/concrete walls is this such a worry? I know from personal experience at least that I've never noticed noisy neighbours!

>Beware concrete cancer and
>rising salt damp in
>basements/carparking areas.

Well that's what we pay you to find for us in building inspections!

>Beware covenants.

That's what your lawyer's for.

>Beware the body corporate fees
>and sinking funds or lack
>thereof.

Ditto - do a BC records search.

>Beware unfinished body corp
>business.

ditto

>Beware on site managers.

Agreed. avoid them like the plague. If ever there was a lazy, do nuthin, take it easy and take people's money kinda job - that's gotta be it.

>Beware central heating and
>cooling plant.

Don't buy in Canberra!

>Beware high ratio of renters
>to owner occupiers.

But doesn't this help you with rental yield. Also, typically, rents are lower for units. This means that the potential pool of tenants is much higher. Also, you need to look at demographics - there is a growing trend towards lone person and couple households. I know I'm painting broad generalisations here but, people who want to rent often do so for either economic or lifestyle reasons ie the either can't afford to buy or they choose not to. In the former case we'll the cheaper the rent the better. In the latter, they probably don't want to be mowing the lawn!
>
>Others can add more ;-)
>

I don't dispute for a moment that your chances for Cap Growth are in all probability better with houses than units. BUT, as Jan mentions in her latest book - you've got to look at OVERALL return ie. Net rental yield plus cap growth.

CG may be king, but cashflow will help the queen pop out lots more baby properties to grow up and make you lots of dollars....

Nigel signing off
 
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Reply: 2
From: Rolf Latham


Hi Caroline

I agree with Nigel to a large extent.

One has to be careful with generalisations.

In 90 % of cases the land content issue holds. In 10 % it gets you into trouble.

Generally the holding costs for a unit are less, while the % rental returns are generally higher, and all with a lower cost barrier for entry.

There are many areas of Sydney for example where it can be clearly shown that a unit investment in that suburb performs either equally or better than a housing investment.
Parts of the lower north shore, eastern suburbs and middle ring to inner west suburbs fall into this category.

Many clients of mine have had very very good results with units as an IP vehicle.

Ta

Rolf
 
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Reply: 1.2.1
From: Michael Croft


Hi Nigel,

I love people jousting with me - joust being from the French to play. My post is tongue in cheek as I too have a number of units.
The list is by no means complete and is simply a few of the things to look out for. If the points are addressed there is little difference - provided the numbers stack up.

Sorry Caroline it wasn't to put you off units.


Michael Croft
 
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Reply: 1.2.1.1
From: The Wife


A good solicitor will say you have covenents and pull you up and explain them and the consequences if any of them, bad ones just report them, and some newbies stare on blankly and say OK.

Also some newbies dont know how to 'work' or 'read' a building inspection, they usually look at the report and then ask for verbal confirmation from the inspector if the building is sound or not.


I dont like individual units because I am a control freak, I feel I lose control over the value of my unit if it sits amongst a lot of other units, and other owners are doing silly things, like selling out to cheap and bringing down the value of my unit.
Of course this is generalization, some units are good no matter where they are or how many you own, but in general, I prefer to buy the whole block and have control of my asset.
TW
~Life is a daring adventure, or nothing at all~
 
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Reply: 1.2.1.1.1
From: Caroline Wilson


Thanks everyone for your comments.

I have been rather close minded to units and have always thought houses to be a better investment. But I guess it all comes down to what the numbers are and where it is - and what it is you're trying to achieve.

In any case it's always wise to no what it is you're up for - negatives and positives.

I've heard that units are harder to sell - is this a far comment - assuming you sell for a fair value?

Do lenders also tend to lend less for units?

Any other negatives or positives are greatly appreciated.


Caroline
 
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Sim

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Reply: 1.2.1.1.1.1
From: Sim' Hampel


On 1/17/02 10:17:00 AM, Caroline Wilson wrote:
>
>I've heard that units are
>harder to sell - is this a far
>comment - assuming you sell
>for a fair value?

It really depends on where it is.

In places like Adelaide where there has been a lot of backyard development, you can get a fully detached "homette" for not much more than a unit, and it is usually far nicer. So in my experience units tend to sell a little more slowly (investors only usually, few owner occupiers).

In parts of Sydney, units are the only thing most people can afford, so demand is naturally quite high with both investors and owner occupiers looking to buy.

 
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Reply: 1.2.1.1.1.2
From: Rolf Latham


Hi Caroline

Ill stick my two bobs worth in on the lenders question.

Strata titled home units in most instances will allow the same LVR as for a house. Some B grade lenders will insist on you taking mortgage insurance on a strata unit as early as 70 % LVR. In this case, shop around.

The ones to be very careful of, if you have a limited deposit are the ones that are Company title. Most lenders require a 30 % deposit with these, and no mortgage insuere will touch them that I know of. BTW that does not make them a bad investment.

Units that are less than a nominal 50 square metres in size are frowned upon by some lenders.

Units that are part of a serviced apartment aggreement can also be interesting but not impossible to get finance for.

So to answer your qeuestion, are they more difficult to get finance for ? - Sometimes yes, but in the majority of cases no.

Do the homework and youll be fine
Ta

Rolf
 
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Reply: 1.2.1.1.1.2.1
From: Caroline Wilson


Thanks Rolf,

At the risk of sounding ignorant what is a Company Title unit?

ta
Caroline
 
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Reply: 1.2.1.1.1.2.1.1
From: Rolf Latham


Hi Caroline

At the risk of using a cliche, the only dumb question is the one you dont ask? Thats what this forum is here for.

There are a number of ways to "own" a unit.

The most common is Strata Title (know by diff terminology in other states Im sure). On this type of title, each unit has its own seprate title, and an Owners Corporation or Body Coprorate decides what you can and cant do with it, but you are usually free to rent it to whomever you like.

The next most common, especially in older blocks is the Company Title. Simply this is where a Company owns all the units. You get an entitlement in the company relevant to your share of the property. The units are NOT separately titled, and the Company can decide what you can and cant do with the property. I have heard of restrictions that a company titled unit could have imposed on it include no tennants only owner occupiers etc etc.

Ta

Rolf
 
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Reply: 1.2.1.1.1.2.1.1.1
From: Duncan M


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In South Australia I believe the Title is called a "Moety" Title. Many banks
wont lend for Moety Titled Units.. Well worth steering clear of IMHO.

Duncan.

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From: propertyforum Listmanager
[mailto:listmanager@bne003w.webcentral.com.au]
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Subject: Units v's houses


From: "Rolf Latham" <rlatham@asapfinancial.com.au>

Hi Caroline

At the risk of using a cliche, the only dumb question is the one you dont
ask? Thats what this forum is here for.

There are a number of ways to "own" a unit.

The most common is Strata Title (know by diff terminology in other states Im
sure). On this type of title, each unit has its own seprate title, and an
Owners Corporation or Body Coprorate decides what you can and cant do with
it, but you are usually free to rent it to whomever you like.

The next most common, especially in older blocks is the Company Title.
Simply this is where a Company owns all the units. You get an entitlement in
the company relevant to your share of the property. The units are NOT
separately titled, and the Company can decide what you can and cant do with
the property. I have heard of restrictions that a company titled unit could
have imposed on it include no tennants only owner occupiers etc etc.

Ta

Rolf



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<TITLE>RE: Units v's houses</TITLE>



In South Australia I believe the Title is called a ="Moety" Title. Many banks wont lend for Moety Titled Units.. =Well worth steering clear of IMHO.

Duncan.


-----Original Message-----
From: propertyforum Listmanager
[mailto:listmanager=@bne003w.webcentral.com.au]
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Subject: Units v's houses



From: "Rolf Latham" =<rlatham@asapfinancial.com.au>


Hi Caroline


At the risk of using a cliche, the only dumb question =is the one you dont ask? Thats what this forum is here for.


There are a number of ways to "own" a unit. =


The most common is Strata Title (know by diff =terminology in other states Im sure). On this type of title, each unit =has its own seprate title, and an Owners Corporation or Body Coprorate =decides what you can and cant do with it, but you are usually free to =rent it to whomever you like.

The next most common, especially in older blocks is =the Company Title. Simply this is where a Company owns all the units. =You get an entitlement in the company relevant to your share of the =property. The units are NOT separately titled, and the Company can =decide what you can and cant do with the property. I have heard of =restrictions that a company titled unit could have imposed on it =include no tennants only owner occupiers etc etc.

Ta


Rolf




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To start a new topic: mailto:propertyf=orum@bne003w.webcentral.com.au
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Reply: 1.2.1.1.1.2.1.1.1.1
From: Caroline Wilson


Thanks Rolf,

I appreciate the explanation

Caroline
 
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Sim

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Reply: 1.2.1.1.1.2.1.1.1.2
From: Sim' Hampel


Actually it's "Moiety Title", and it is not quite the same as company title.

The following (rather confusing) description discusses them for those interested

(from http://www.homebuyers.sa.com.au/homebuyers/em/resources.html)

In general I believe that moiety titles are sometimes used for structures like a pair of maisonettes. Company titles are also used in South Australia, although according to my conveyancer, they are not all that common.

- - - -

MOIETY TITLES

A moiety title is issued for a fractional interest in land. For example if there were 2 dwellings in a complex, then the owner of each dwelling would each be provided with a separate title with different folio numbers but only giving them a half interest in the dwelling.

In the diagram below A occupies area X and B occupies area Y. The total area is X + Y and is called "the land". Hence legally A and B could each occupy any half of the total area. That is A could occupy part of area Y and B could occupy part of area X. To prevent this B would lease area X to A and A would lease area Y to B. These are called "cross leases" and should be registered on both moiety titles.

In a larger complex (eg 8 occupancies) it is common for all "the land" to be leased to a company which administers the complex in a similar fashion to a strata corporation. The company sub-leases to each occupant giving them exclusive use of a particular area of "the land".

- - - -

 
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