Would you do it?

[Grogounet]

All,
Need some advise.
Have an op to secure a small one bedder privately and the only two reasons that I may be interested:
- 300m from Freshwater Beach, nsw (Future CG)
- Seller and I have agreed to split the agent's potential commission (2%)

Been valued by Westpac $460k
Rent will be $400 - $410 max (without reno)
Reno (Kitchen mainly) - $8k
Old building - mid 70s, so I guess no depreciation?

The plan would be to buy and never sell. I want to use the equity from PPOR (Valued $550K, bought $500k and owe the bank $400k) to help with stamp duty and probably take a 90% loan.

The issue:
I have done the numbers and it just doesn't work.
Pessimistic calculations would probably cost me around $100 a week to keep it.

Does this sounds right? I was expected the smaller places to carry more yields? It seems that Freshwater gets only 5% yield...

Also, my LVR will be a bit high and I have $ on the offset proving I can service two loans no pb.

 

[Grogounet]

Also, I know some may ask what is my strategy.

I live now in a the small two bedder and save as much as we can on the offset.

Plan to use the offset to buy a three bed house at some stage, ETA in two years as this is when we shall have the full amount owed to the bank on the offset account.

So we will keep the two bed as an investment, and live in the 3 bed for our PPOR.
The one bed investment would probably mean that we will need to stay longer in our current PPOR - 6 months, one year approx...

 

[PS10]

I would do it, especially if it only meant holding out for a year to buy your PPOR. This will give you another asset which in time, being well located should appreciate nicely.

 

[starter]

Do you think the apartment is a good purchase?

 

[Grogounet]

Thanks Both,

Starter, the appartment itself isn't the nicest.
It misses two big compoments: No internal laundry and no owen.
It has a lock garage, not perfectly accessible.
The light is ok, nothing great.

The main aspect is its location really, in between the shops and the beach, at the back of the block.
It s literrally three mins from the beach and close to direct morning buses that go to and from the City.

Would be ideal for young couples to live in there a couple of years before moving to a two bed...

 

[Perp]

the only two reasons that I may be interested:
- 300m from Freshwater Beach, nsw (Future CG)
- Seller and I have agreed to split the agent's potential commission (2%)

With regard to the first point, I assume there are many thousands of other units that have at least as good a position.

With regard to the second point, this is a fiction. It's really a nonsense to speak of getting a "discount" on a property sale, because it assumes that there's some objective starting point from which you start counting. Obviously there's no such thing, there's just "the price" and whether that represents good value or not.

Whether the end price represents a lower level than some mythical starting point is truly a fiction and intended only to create fear or loss, i.e. "don't want to miss out on a potential saving!"

It should only play any role in your decision-making if you were deciding between two potential identical 1 BR units for sale, and had agreed the same price on both, and then one of the sellers offered you a 2% discount. Then it could possibly be argued that there's a genuine saving, but even then I'd say it's just competitive negotiation. In the absence of such a contrived situation, you really have no idea whether they just padded their mental selling price by 2% - or more! - to take into account your illusory discount.

You should totally eliminate the second factor from your considerations.

 

[Grogounet]

With regard to the first point, I assume there are many thousands of other units that have at least as good a position.

With regard to the second point, this is a fiction. It's really a nonsense to speak of getting a "discount" on a property sale, because it assumes that there's some objective starting point from which you start counting. Obviously there's no such thing, there's just "the price" and whether that represents good value or not.

Whether the end price represents a lower level than some mythical starting point is truly a fiction and intended only to create fear or loss, i.e. "don't want to miss out on a potential saving!"

It should only play any role in your decision-making if you were deciding between two potential identical 1 BR units for sale, and had agreed the same price on both, and then one of the sellers offered you a 2% discount. Then it could possibly be argued that there's a genuine saving, but even then I'd say it's just competitive negotiation. In the absence of such a contrived situation, you really have no idea whether they just padded their mental selling price by 2% - or more! - to take into account your illusory discount.

You should totally eliminate the second factor from your considerations.

Thanks, while I agree on this statement, Freshwater is still one of these suburbs where buying at the valued (by bank) price is relatively hard, still a seller's suburb. While Sydney has cooled a bit, Freshie is still growing now, hense a possibility for me to secure at a fair price, not inflated by potential demand..

 

[Perp]

a possibility for me to secure at a fair price, not inflated by potential demand.

I take your point, that's a different matter

 

[zimby]

No Mention of Purchase Price.
No mention of body corporate fee's
I personally wouldn't touch it unless there was potential for epic GC.
Out of pocket expenses will hamper savings/future purchases.
Maybe Sydney is different.

 

[neK]

Why would this person sell it to you for less when they can get more for it on the open market.

Doesn't make sense.

 

[thatbum]

I personally wouldn't touch it unless there was potential for epic GC.

This +1.

It seems unexceptional in most respects, and even below average for apartment yield? (Although not sure about the yields in that area)

 

[Rolf Latham]

Freshie is still growing now, hense a possibility for me to secure at a fair price, not inflated by potential demand..

Amazing locality name change

But like much stock norhern beaches and lns, its had laggard growth for a fairlylong time and is playing catch up.

How long that catch up lasts.........................

ta

rolf

 

[BayView]

A 5% yield - to me - is a bad number for a start.

Instant neg cashflow from day one.

The only justification for a purchase like that is if you know the cap gain will outrun the cash drain each week.

And/or; you can afford - and don't care about - the cash drain each week.

I haven't met too many folks who consider losing $100 not worth worrying about each week.

The only folks who promote 5% as a good number are real estate agents.

 

[JacM]

I agree with Bayview. This is a cashflow drain from day 1. If you knew that it was going to have epic capital gain and by what date, then wonderful. But you need to be able to hold on by your fingernails while you wait for such gain.

Run a mile.

 

[Grogounet]

UPDATE -

Property got valued at $400k, I was happy to buy !

An agent came in and the guy went with him. Sold 3 weeks later at $461k...
Seems that would have been a great buy indeed !