What to do? Units or house?

[wjcrowl]

Looking for guidance.

Have recently become aware of block of units in Cairns for sale. Asking 240k for 6 units. 4x1, 2x2 part of a block that also includes 3 shops. All on strata title. The ownership of the six units will give effective control of the body corporate as well. the shops are owned by someone else.

the 1 br units are getting 90pw and the 2br currently vacant.

Area is not likely to see much capital growth as is in inner suburb with a mixture of residential and industrial areas.

This appears to offer good yield but am concerned at long term benefit.

Alternatively, I could purchase a solid brick, clean 4brm 2brm house in reasonable area for 240k, likely to get 270-300pw rent.

Suggestions welcome.

Wayne

 

[bundy1964]

Hmmmm

Potential rent of $500 a week compared to $300 for the same price.

Things to think about.......

Strata fees.

Depreciation available.

Vacancy rates for each area.

Services for each area.

Your long term plans.

bundy

 

[hwd007]

if the land content is the same I would go for the city block. you also would get better zoning for multi story re-development in future. So many factors to consider though. Would it be worth rennovating the vacant flats ?

 

[Donna L]

Watch the "control of the Body Corporate thing". Body Corporates are often worked so that one owner has one vote not six cos you own six flats. This was set up to prevent one person in a building being disadvantaged by one person having a monopoly. Check Body Corporate provisions.

 

[handyandy]

"Watch the "control of the Body Corporate thing". Body Corporates are often worked so that one owner has one vote not six cos you own six flats. This was set up to prevent one person in a building being disadvantaged by one person having a monopoly. Check Body Corporate provisions."

You can overcome this restriction by buying in two different entities.

Cheers

 

[wjcrowl]

Thanks for your replies.

Good point to check out the Body corp regs for voting rights. Will do.

Given the shops underneath are owned seperately I would have to be able to acquire them in the future before I could redevelop. But certainly worth the thought.

I am hoping to do up the 2brm units and relet them at 130-140pw
which would give approx 600-620 pw rental on all units and 12% yield.

Much appreciate everyone's input and feedback, it certainly helps to know you are not out their by yourself.

cheers Wayne

 

[Keen]

My inexperienced two bob.

If I was to buy 6 units I would like to diversify by buying each one in different suburbs.

If something goes sourer in this area - you've put all your eggs in one basket.

Having said that you seem far more ambitious than I - maybe you'll have found yourself a gold mine by buying all 6.

Anyway goodluck.

Keen

 

[hwd007]

Keen you have raised a good point. Crowl I would make sure you have heaps of insurance. Like over kill I would say so if things did get bad, the whol block is well covered.

 

[wjcrowl]

Thanks Keen, HWD

I have recently got lanllord insurance quotes on my IP in Victoria and the cost is approx 2 x what normal house insurance is. Is this normally the case? The quote was from CGU, does anybody know of other providers?

cheers Wayne

 

[Keen]

wjcrowl,

for my 1st IP I'm using Rentcover Plus.

Building and contents for 100k - $286.20
RentCover Plus Ultra (landlord insurance) -$209

Total $495.20
Their no. 1800 800 544 website www.rentcover.com.au

What I like was
a) no difference in premium if you manage vs PM
b) found alot of Insurance Co. only covered malice damage upto 10% of the Insured value (ie 10% of 100k = 10k) - not these guys

If some tennant took a baseball bat and absolutely trashed your place the other insurance co would cover only 10k - these guys cover up to 50k.

Regards
Keen

 

[hwd007]

yea CGU do seem expensive

 

[chrispy]

Units - Cairns suburbs

I have recently purchased 4 x 2 br for $250k returning $540 pw gross. I have a great agent who gives me advice on areas to buy in etc. His advice stopped me from buying in an area I have now found out is almost impossible to let. Having a good agent you can trust is imperative.

I have spent $20k on fittings to get the better tenants (good blinds, airconditioning, built-ins etc)

We already have others in Cairns suburbs returning excellent capital growth ($20k in 4 months and $12k in 2 months), both good rental returns

Returned from Cairns this morning, the market is moving so fast that it is very difficult to obtain units at the lower end of the market (under $90k) they are selling within 2 days if they are any good.

I found RACV to be the lowest quote on the insurance

Hope this helps

 

[hwd007]

westpac offer cheap landlords insurance. coverage may not be the best on the market though.