What is Sinking Fund?

[WebBoard]

From: Dr IT


Hi Hi!

Being an ignorant wannabe investor, I came across a property which I want to be my first IP. However, the annual Strata fees seemed to be at the high end :- amounting to about $1500 per year.

The fees:-
Admin Fund: $418.68/ 6 months
Sinking Fund: $344.72 / 6 months (+ GST)

Is this something that I should be worried about?

Thanks in advance

Dr. I.T

 

[WebBoard]

Reply: 1
From: Sergey Golovin


Some one can probably answer much better, then me but basics are - It is a pool of money put aside by body corporate for maintenance, contributed by owners of the units in building. If the fund is empty you might expect that yearly (half-yearly) fees would be quite high. Other wise should not be a problem. You can also ask for all previous statements to see what they up to. If they will refuse must be something wrong.
You might have to pay small amount $40-50? to have access to it. But it is OK.

I hope it helps.
Serge G.

 

[duncan_m]

Reply: 1.1
From: Duncan M


>You can also ask for all
>previous statements to see
>what they up to. If they will
>refuse must be something
>wrong.

Very good advice Serge, the minutes will also reveal if the Strata Group is dominated by a particular owner who has more than 1 unit in the complex. Additionally, it'll often reveal if there are large expenses looming as major repairs are often discussed but deferred at meetings.

Cheers, Duncan.

 

[WebBoard]

Reply: 1.2
From: Dr IT


Thanks Sergey!

In further to that, I've a word with the real estate agent and he'd told me that
the strata is high because

1) they are putting in new Windows in all the units and
2) the strata fees in that area is normally high.

The last point is a pure blatant lie -() because on another unit (in the same area but in a different block), the fees are about right (about $1000).

Looks like I need to dig a bit further.

 

[WebBoard]

Reply: 1.2.1
From: Samuel Riley


Try and find out how much $$$ is in the sinking fund. The more the better because lets say there is $30,000 and there are 10 units in the building then essentially you are getting $3,000 for nothing, this is providing the body corporate is wise in its use of these $$$

On the reverse side if there is not much $$$ in the sinking fund then it will be a while before the do any more improvements. eg upgrade security, paint, etc..

This may not affect your decision to buy or not but every bit of information plays its part

regards,

Sam