I am about to buy a block of 4 units that return 8% on the inital investment they are all currently leased. The banks don’t like more than 3 to 4 units in a block I was told but I think that at present its not a bad investment for the long term, and with a bit of TLC they most probably return close to 9% I hope!
Any thoughts and advice would be of most help.Zuki, sounds like a good deal to me. I would look closely at the cap gain opportunity as well as likely rent increase over time to give you some protection from possible interest hike over the next 2 to 3 yrs, but at today’s rates it sounds like a very good deal.
I like these deals even more if they offer the ability to split title, giving you lots of flexibility down the road – i.e sell two and keep two. How does it look when strata/management costs are taken into consideration ? I would be interested to know where the block is located and how the opportunity pressented itself as I am alsways on the look out for similar opportunities myself.
As far as the bank goes, I think in this market if the valuations are supportive and you can present a solid business case with risk management considerations then it should be a no-brainer.
Rgds.
Thanks for your input Stocki
I just can’t at the moment tell you where they are at the moment but after the deal I will be glad to tell you the area so I will keep you posted all I can tell you that it is about 1hr from a capital city. There has been more of these investments in the past that I have missed in the same area. Future Capital growth? thats hard to predict as everything has increased in the past 24months in every area and city so can it still increase? and as for rent I think with a bit of TLC I can get an extra $10 a week.
I might have a hard time to strata as councils always say put the proposal in and then we will see there is no guarantee. So even that it doesn’t go through as time gets on and affordability decreases they may relax their policies based on the merits of the proposal.
Thnx again for your input.Hi Zuki,
We have 2 blocks of units, one 4 one 5. The banks should be fine with lending for 4.
One thing to be aware, was that 8% gross return? Are they all on one meter? Water rates can be a KILLER in some towns, especially in the drought areas. How do the figures come out after the council & water rates, vacancies, & repairs etc.
We like units because the likelyhood of them all being vacant at the same time is quite low.
Good luck,
Del
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