What do you think of this OTP at Central Park Sydney???

[Mindmaster]

I have a very close Chinese friend who is a step away from buying an apartment in the Central Park development. I think she could be making a very expensive mistake so I’m doing some quick DD for her.

Size – total 55.5m2, internal area 46.9m2, loggia/balcony 8.6m2
Price - $560,000
Location – 12 floor, tower 3 opposite University of Technology Sydney
Features – one bedroom, no car park (looks like a studio apartment to me, see attachment)
Expected rent - $650 a week (massive red flag)
Completion date – August 2013
Plan – rent as cash flow neutral then sell in 2015-16 after CG (another red flag)

Rental rates – a quick search on REA.com shows rents for established apartments in the same area that are bigger and often include car parks to be around $420 to $520

I’m not familiar with Sydney CBD apartments and only know enough about OTP to be extremely careful and expect most OTP deals to be bad deals. I searched and could only find one thread on this kind of purchase that dated two years ago. The feedback in that thread was negative.

My feeling about this deal is the development company is spruiking high rents and CG to overseas buyers with very glossy promotions and slick sales pitches based purely on the development’s location.

Pros
-Great location
-available to foreign investors

Cons
-OTP
-over supply
-too small
-high management fees

If you could give me your opinion on this deal, you may help someone from wasting a lot of money OR prevent me from giving bad advice that stops them from a good deal.

 

[Aaron_C]

The 'Pro' of being available to foreign investors is only true for the original purchaser. After they settle on it, the property is now considered 'established' and is therefore not able to be sold to a foreigner as an exemption.

 

[Richard Feynman]

How is the rent being calculated? I have no idea but it does seem very suss.

However, Central Park is about the coolest development happening in Sydney. Perhaps they are assuming extra rent based on that. It'll probably be one of the nicest places one can live right in the city.

Frasers know what they're doing. The whole master planned development is awesome. Don't get me started on the vertical garden (to be the world's tallest).

 

[Shahin_Afarin]

Strata would be gargantuan for that place. Also it looks more like a studio than a one bedder.

Regards

Shahin

 

[Tom84]

I can't see it renting that high, I bought a 1bed+Study place next to this development 77SQm for less than 480k and rents much higher but that's because students partition the living rooms and cram extra people into the study. Huge difference between letting it to a bunch of students than renting it via an RE where the median rent would be closer to 450 - 550 for a new studio/1bedda.

This development is too nice and I can't imagine the Strata allowing excessive over-crowding like the nearby buildings are doing (Older buildings are much larger and bang for buck and quite common for 4-7+ students in a 1bedroom apartment) and with the new units almost all the buyers are Chinese (The developer was barely interested too speak to me when I called him and enquired) CP seems to be a place where Mainland PRC can store their cash now that HK is introducing a new property tax and some of them can afford to buy a bunch of units in one go - who will they rent them too? All the other Hi-Societies would just buy them-self one rather than pay above average rentals.

Still some fantastic buys close by to this development with cheap strata, low entry costs and larger SQM Chippendale is definitely a suburb to keep an eye on. I believe the prestige of the place may allow the values to hold steady and grow over the next fews years.. but not nearly as much as the lower cost units in the same suburb they will offer better cash-flow and gains for sure.

I would be interested to see if she is able to haggle a discount they seem awfully confident that almost all the units are sold but I would love to find out the real statistics.

I have a very close Chinese friend who is a step away from buying an apartment in the Central Park development. I think she could be making a very expensive mistake so I’m doing some quick DD for her.

Size – total 55.5m2, internal area 46.9m2, loggia/balcony 8.6m2
Price - $560,000
Location – 12 floor, tower 3 opposite University of Technology Sydney
Features – one bedroom, no car park (looks like a studio apartment to me, see attachment)
Expected rent - $650 a week (massive red flag)
Completion date – August 2013
Plan – rent as cash flow neutral then sell in 2015-16 after CG (another red flag)

Rental rates – a quick search on REA.com shows rents for established apartments in the same area that are bigger and often include car parks to be around $420 to $520

I’m not familiar with Sydney CBD apartments and only know enough about OTP to be extremely careful and expect most OTP deals to be bad deals. I searched and could only find one thread on this kind of purchase that dated two years ago. The feedback in that thread was negative.

My feeling about this deal is the development company is spruiking high rents and CG to overseas buyers with very glossy promotions and slick sales pitches based purely on the development’s location.

Pros
-Great location
-available to foreign investors

Cons
-OTP
-over supply
-too small
-high management fees

If you could give me your opinion on this deal, you may help someone from wasting a lot of money OR prevent me from giving bad advice that stops them from a good deal.

 

[Mindmaster]

Thank you everyone for your replies.

How is the rent being calculated? I have no idea but it does seem very suss.

However, Central Park is about the coolest development happening in Sydney. Perhaps they are assuming extra rent based on that. It'll probably be one of the nicest places one can live right in the city.

Frasers know what they're doing. The whole master planned development is awesome. Don't get me started on the vertical garden (to be the world's tallest).

No idea how the rent is calculated, I think it is a figure thrown about by the slaes people which is one of the reasons I don't give it a lot of credibility.

It does look like a great place to live but not good value for money as an investment. What can you tell me about the vertical garden?

I can't see it renting that high, I bought a 1bed+Study place next to this development 77SQm for less than 480k and rents much higher but that's because students partition the living rooms and cram extra people into the study. Huge difference between letting it to a bunch of students than renting it via an RE where the median rent would be closer to 450 - 550 for a new studio/1bedda.

This development is too nice and I can't imagine the Strata allowing excessive over-crowding like the nearby buildings are doing (Older buildings are much larger and bang for buck and quite common for 4-7+ students in a 1bedroom apartment) and with the new units almost all the buyers are Chinese (The developer was barely interested too speak to me when I called him and enquired) CP seems to be a place where Mainland PRC can store their cash now that HK is introducing a new property tax and some of them can afford to buy a bunch of units in one go - who will they rent them too? All the other Hi-Societies would just buy them-self one rather than pay above average rentals.

Still some fantastic buys close by to this development with cheap strata, low entry costs and larger SQM Chippendale is definitely a suburb to keep an eye on. I believe the prestige of the place may allow the values to hold steady and grow over the next fews years.. but not nearly as much as the lower cost units in the same suburb they will offer better cash-flow and gains for sure.

I would be interested to see if she is able to haggle a discount they seem awfully confident that almost all the units are sold but I would love to find out the real statistics.

You are right about the target market. Looks like a typical example of two tier marketing with higher prices for foreign investors who don't know (or care) about market rates.

The project looks great on paper but not so good by the numbers as an investment.

Strata would be gargantuan for that place. Also it looks more like a studio than a one bedder.

Regards

Shahin

Yup, so forget about cashflow nuetral even IF there is a rent of $650.

 

[Shahin_Afarin]

I bet it would need to be $1000 p/w rent for it to be neutral. It would be a heavily negatively geared property.

Regards

Shahin

 

[Propertunity]

..... internal area 46.9m2, .....

I'm already having a problem with the size.

Location – 12 floor, tower 3 opposite University of Technology Sydney

So, not particularly unique.

no car park

I'd never buy a unit in Sydney with 0 car space.

Expected rent - $650 a week (massive red flag)

Seems high by comparison.

Completion date – August 2013

At least construction is well underway. Many OTP's never get out of the ground.

Plan – rent as cash flow neutral then sell in 2015-16 after CG (another red flag)

This is not going to be anywhere near cah flow neutral (depending on how much money is being borrowed. Selling after 2-3 years to pick up CG is NOT a strategy that can be relied upon. You need 7-12 years for a full RE cycle as a minimum OR you stand to make a loss.

...established apartments in the same area that are bigger and often include car parks to be around $420 to $520

So $650pw as quoted does seem high in the current market.

My feeling about this deal is the development company is spruiking high rents and CG to overseas buyers with very glossy promotions and slick sales pitches based purely on the development’s location.

There are 3 things which I like about this development:
1. We are in what looks to be a 'rising market'
2. Completion is not far off - so your friend will probably know what she is getting
3. The location

What I don't like is:
1. There are no guarantees of what the market will be doing on completion
2. The buiilding is not finished
3. There is nothing unique about a 1brm studio in a high rise
4. High BC fees - and higher once the lift warranties run out
5. Zero car
6. Small floor plan
7. You friend's strategy of planning to sell for CG in only a few short years

Overall, my views on OTP are here:
http://somersoft.com/forums/showpost.php?p=880508&postcount=7

Can you friend make money - maybe. I'm not saying it definitely won't work but.....................

 

[nhg]

Mate was renting a gorgeous studio (about the same size as that) with carpark around the corner for $450/week last year.

I highly doubt $650 is anywhere near realistic without a carpark space.

 

[cimbom]

I wouldn't buy a 1 bedder that had less than 60sqm living space (not inc balcony).

 

[DaveM]

OTP
46sqm
No car space
Very high strata
Dubious 6% gross return

I struggle to see how any of that adds up to a good buy

 

[depreciator]

It is going to be a nice development, though. I had a wander around the other day.
Given it's right across the road from UTS, I'll be curious to see how they go about stopping people renting out their apartments to a dozen students at a time. A lot of the buildings in the city are grappling with that problem and trying a few things to put a stop to it.

 

[Aaron_C]

It is going to be a nice development, though. I had a wander around the other day.
Given it's right across the road from UTS, I'll be curious to see how they go about stopping people renting out their apartments to a dozen students at a time. A lot of the buildings in the city are grappling with that problem and trying a few things to put a stop to it.

It's pretty simple really. Check the floors which have smelly rubbish compartments. More people = more mess, particularly students.

Check the electricity/water usage. Fail-safe way. Raid, kick them out and repeat.

 

[DaveM]

It is going to be a nice development, though. I had a wander around the other day.

Does it have any lime green?

 

[depreciator]

Not yet. I'm sure there will be some - that colour is coming back.

 

[vaughan]

It is going to be a nice development, though. I had a wander around the other day.
Given it's right across the road from UTS, I'll be curious to see how they go about stopping people renting out their apartments to a dozen students at a time. A lot of the buildings in the city are grappling with that problem and trying a few things to put a stop to it.

I believe that UTS and Sydney Uni have a couple of student accommodation developments just down the road, but probably nothing at the scale of CP.

 

[vaughan]

OTP
46sqm
No car space
Very high strata
Dubious 6% gross return

I struggle to see how any of that adds up to a good buy

To paraphrase Gimli in Lord of the Rings:
"Certainty of loss, small chance of profit - what are we waiting for?"

 

[Mindmaster]

Thank you everyone for your help.

My friend saw the light and decided not to buy that apartment.

Now she is on the look out for a cheaper OTP

Some people need to learn the hard way I guess

 

[prometheus888]

I actually bought one of these.

Had the intention of renting it out........but after serious consideration, the place is FAR too nice to cram 20 chinese students in one room and stink up the whole place. I'm just going to move in and enjoy it instead. Getting more and more excited about moving in.

Do I think it's a good investment? probably not, unless they finish up the whole complex, shops, offices and the other residential buildings to give it a more upclass feel to the area.