I am planning to make a further offer to a unit which is only 39sqm 1 bedroom unit.
Return is quite good. Only thing is that normally major banks and financial institutions will not finance to units less 50sqm. (well I just found out.)
What do you think about such a small unit?
Would you avoid it?
Or if the return was good, would you go for it?Usually these units have slow capital growth potential because they are hard to sell. Also, Do you know if there are any strata or management fees??
Daniel
Avoid this size unit.
As you say the abnks don’t like lending for them. Valuers will value them at a lower figure.
Fewer tenants want them
If you ever have to sell it will be much harder for the above reasons.
OF COURSE IT IS CHEAP and it will always be
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
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FREE subscription http://www.metropole.com.auhi Maruco
you’ll put me in the dog house for this one.
I’m of a different view for couple of reasons
1. It will be cheap because most banks won’t lend on them so you will have less buyers but also that gives you great bargaining power.
2.fewer tennents want them not so most of the 35sq units in king cross area of sydney have awaiting list because they are cheap ( anything cheap and a back packer, single or drugee will want)( I added drugee to liven up the post)
3. The return is similar to larger units and have I a business associate that only buys this type of unit because of his bargaining power.
so if you have the cash and you don’t need a bank ie drawing equity out of another property invest in a dog house as long as you have someone to live in it
Example
broadway house camperdown Sydney 150 x 1 bedroom appartments between 22 and 35 (so yours would be like a penthouse in this development) all sold within 3 weeks and waiting list to get in
why sydney uni opposite.
location location location
so unlike the other posters I never give up on an investment unless you have done your due diligences.
before giving up on it put a put call on it so you secure it and then post were it is and see what people think.
if in sydney I’ll give you my opinion I don’t invest in this type of unit as I have a lot on my plate at the moment.
hope I helped oh and the broadway unit were at one time called the dog boxes.
I should watch what I post or the guys from hong kong will bring in the sleep boxes that are the size of a coffin and you can invest in them in hong kong.here to help
Thank you for your opinions.
In relation to the bargaining power, I thought in the same way.
I offered $8,000 below the asking price and the vendor counter offered just $2,000 below the original asking price.
I went up $2,000 more, but he didn’t accept it.
The prop is in market more than 2 1/2 months because of the size problem, but the vendor is not willing to negotiate much.Yes, the unit has BC fee.
If I calculate including the BC fee and the vendor’s counter offer, the yield is 6.9%
If I don’t include the BC, the yield is 8.38%.It looks like the same type of person as my friend who keeps one of his IP vacant and unsold for more than 3 years, yet refuses to lower his sale price.
Frankly the returns are line ball for something that will have no growth. Do not touch ot. Look to other markets like New Zealand. Properties like this are losing money once you incluse body corporate fees why would you consider it.
Nigel Kibel
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My first property purchase was two free standing units(?) (bungalows?), strata titled but sold as one. One of the units is about the same size as the one you are offering for. Yield for this unit when bought was about 13%. On paper capital gain has also been great. I’m not sure if will sell for what I’ve been told it will (and have no intention of finding out at this stage). May be if sell both together?
Anne.
Maruco, also keep in mind that there might be extra levies payable at some stage.
If it is in one of those buildings with all the luxuries like a pool and a gym and a spa, there is more of a risk that something will need repairing and that there won’t be enough money in the sinking fund.
If there’s a 6-8% yield (which means you will still have to keep digging into your pockets) but hardly any or no capital growth, then is it really worth it?
Also, owning this kind of investment may prevent you from investing in further IP’s since the banks[buz2] won’t be thrilled to let you use the equity (if any) from this unit, since they are so hard to sell.
Celivia
Maruco,
Forgetting for a minute it is a sub 50sqm unit, it doesn’t sound like you are dealing with a motivated seller. Hence it doesn’t sound like you are going to get a great deal.
Just a thought,
Cheers,
Batts
Thank you very much everyone.
I called another agent and she said 90% of 1 bed units in the city are less 50sqm. And the one she was selling was also only 40sqm and the price was $16,000 more than the one I was considering…
Well, my wonderful mortgage broker (he is from this forum) got an approval of 80% loan from a good bank, so I made an offer to another unit which is 46sqm, slightly better than the other one (39sqm), and the vendor accepted.
The offer was just $5,000 below the asking price, though.
If I could get a loan, I’m sure most of people can get one, so it won’t be a too much trouble in case when I want to sell it in the future.
Lots of warnings regarding the capital growth of this kind of units…. Well, I think I chose to learn it in the hard way….
Probably I would live there when I retire.Yeah, when you’re grey and old and don’t want to have to walk far to get to the toilet (esply when you need to go in a hurry!) 40sqm may seem plenty big.
Yeah, that’s right.
It is just I am so used to live in a small space like Hong Kong, Japan, I actually enjoy living in a small unit. You know, you can reach everything if you stretch your arms.
When people get older, warm climate, handy location to CBD & hospital, a little walk on a beach sounds very nice.
Now I’m really looking forward to retiring!I have been able to borrow against the on paper capital growth of my less than 50sqm unit to buy another investment property.
Anne.
Awww Maruco, congratulations on your purchase. [biggrin]
I’m glad that you were able to borrow 80% [buz2], and 46 m2 is a quite a nice size for a one bedroom unit!
You have inspected it, liked it, liked the location, was happy with the price and the rental return and then went with your gut-feelings.
Good on you!Celivia
Thank you, Anne and Celivia.
But I didn’t inspect or never been to the city.
I just picked on internet and called agents to get more information about what I needed to know.
I made sure to include escape clauses such as “subject to finance” in case a bank think it doesn’t worth the price, “subject to building inspections” to be sure the building is structurely O.K. and in case some repairs needed, and “subject to my solicitor’s approval on strata details”.
I am happy with the location and the choice I made, which is important to me.
Thanks everyone.Hi Maruco,
Just on the finance issue, speak to APerry on this forum, he is one of the very few that can do finance on under 50sqm without any problems.
Otherwise if the numbers work for you, than it maybe ok..
Roy H.
L.R.E.A., Dip FS (FP)Guardian Property Specialists (GPS) is a research-focused company that specialises in sourcing and providing residential investment properties Australia wide!
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