Would you consider this Property

[stargazer]

Hi there

Would you consider this based on numbers and location.

Property...Beachside Adelaide

2 bedroom apartment, block of 14.
at the top, no sea views but 50m from beach esplanade.
Built 1968 Refurbished
68sqm
No lifts

Apartment Block in good order appealing quiet location

Price $305000

Rent $270pw

Council rates 650pa
Strata 1150pa
water 600pa
Borrow 85% no LMI ( Westpac) Posssible loan

Figures go into Negative and a cost, out of own pocket, but weighing up the beachside factor. CG has been strong last 5 years.

Any thoughts

Cheers
BC

 

[steveadl]

BC,

Where is it? ie. Brighton, Glenelg, Largs etc etc.

Cheers
Steve

 

[Simon]

I'd consider it.

 

[lizzie]

with no lifts - how high up are you being on the top floor? this could deter cg increase. the building was built late 60's - are there any plans to modernise the building? what else can you get in the area for $305k, perhaps a little further from the beach (up to 500m) but with a land component? anything around with views? (views that can't be built out are priceless). is there another property around the same price that you can increase the value on by subdividing or developing? has the unit been reno'd or can you do it yourself to increase value and rent?

i'd consider it, but look at many other options instead. the reason being is that you are limited to what you can do to the unit by the other owners - makes it hard to value add. now - if you owned the whole block .

 

[CairnsAgent]

What is the projected growth for the area?
Is this in a high value area like Glenelg?
Are there alot of ne units / apartments under construction or have been approved for development?

cheers

 

[VYBerlinaV8]

I wouldn't for 2 reasons:
1) I don't buy investments that are negative cashflow after tax.
2) Deduction schedule would be poor.

This doesn't mean it won't increase in value for good cg, simply that my approach of buying strong yielding properties and paying P&I with a view to eventual ownership doens't match this property...

 

[GoAnna!]

What will annual holding cost be?

What is anticipated growth per year (over say next 5 years)?

Do you think if you sold in 2 years time you would make money or possabily lose it after you take holding costs into account?

This property 100% relied on the market doing the right thing which does add to the risk if you are not 100% confident in market.

 

[stargazer]

Hi everyone

Thanks for your replies.

The property is in glenelg.

The block the 3 floors high so it is on top. 2 flights of steps.

Projected growth is around 10-15%

The unit is renovated already and the block is in good condition has had an upgrade in recent times buy the looks. Has undercover parking and security fence and gate.

expenses
Council rates 650pa
Strata 1150pa
water 600pa
Borrow 85% no LMI ( Westpac) Posssible loan [email protected]% I/O 19443
add PM 8% 1500pa

total 24843

Rent 270 52 weeks 14040

14040-24843= -10803 30% deduction

after tax 7562 or 145pw

No building depreciation

Quantity surveyor would find some deductions

CG would have to increase at 2.5% pa to break even approx

Thanks all



Cheers
BC

 

[steveadl]

BC,

I don't really have that much experience with apartments so I'd just throw out a few observations.

There are a lot of apartment buildings @ Glenelg, including plenty of new ones, and more being built. Raising this issue as you may also wish to look at perhaps buying a newer one that would offer depreciation benefits, and may also return a better rent.

Also, if the apartment block is built in the 60's - is there the possibility that in another 10yrs a developer may be looking at demolishing the place and putting a brand new apartment complex etc. on the site? In which case you may have extra costs/issues arising? Also, may be higher maintenance costs on the older building as opposed to the newer ones?

Having said all that, the 2.5% CG you need to break even sounds quite easily attainable, and I would definitely buy an apartment at Glenelg as opposed to Adelaide CBD. I also think you'll be buying into Adelaide at a good time, with the mining boom set to hit our state over the next 10yrs.

 

[TheAnalyst]

NO to me. I just checked few properties in Scarborough in Perth. A very popular spot. Over the last mad years, the units are NO way better than a real house. I decided to not buy units but an established house.

 

[Beef_Hooked]

Id agree with The Analyst there.

The first property I bought in '85 was a unit/apartment about 20 years old, and after holding for 22 years, it is starting to need expensive repairs.

Before this (when I was young, single and carefree I felt strata title was great as the owners were all pretty much agreed and I didn't have to be directly involved in general upkeep (mowing, cleaning gutters etc) in fact it was almost set and forget up until about 5 years ago when repairs and maintenance became a major issue.

Now I have it on the market as I feel I have little or no control. The strata company decides the repair priorities, which the owners (myself included) never seem to be able to agree upon.

We have problems with what is considered necessary maintenance and what is capital expenditure/improvement. Short term owners prefer cosmetic cover ups rather than expensive resolution to problems, and if you are a hands on type you can't take on the tasks yourself in order to save money, as other owners would rather pay someone to carry out the simplest tasks.

It has put me off strata titles for life and once sold I will def. put the money into a house where I can make all the decisions myself and carry out repairs when and as needed rather than having to appeal to the strata referee and all the associated dramas.

From my experience I would say if it's old give it a miss, if it's fairly new then OK, but either way it is worth carefully considering whether it suits you not having full control.

Apart from that the figures look good to me.

Cheers,
Beef.

 

[stargazer]

Hi all

Thanks for your input.

The strata issues have been nagging at me and also the age, looking 10 years down the track and also miss out on building depreciation. etc

Have considered dropping strata title many i have come across have company/community/ title and are lower in price but probably absolutely no control not even for tenant in some cases.

and sticking only with torrens title eg a townhouse/villa/house.

Close to the water the prices, for such, are way over the top in this area and usually old the land holding the value.

Anything that has been already done costs a motza fo rmy budget anyway.

Cheers
BC