I am very shortly about to purchase my first home/investment property. The key ROI I am looking for is a positive cashflow. I have been able to secure a ‘first home buyers’ loan which effectively gives me 100% finance up to a given amount. I plan to use this to purchase a place, to live for a few months, before moving out and renting the place completely. Ideally I would like a house, but I have found attractive looking deals on apartments which offer yields of 10% and instant equity. I am a bit wary about buying an apartmnet, but wanted some further advice as to weather others have had success with apartments or ‘stay away’. Any advice would be greatly preciated. [biggrin]
I read somewhere that apartments are overvalued at the moment. Apartments are generally supposed to be 75-80% of house prices. This is not the case at the moment
Hi Boon69,
I recently settled an apartment purchased off-the-plan about 3 years ago and even though the property has increased in value over that period, I still wish I did not invest in an apartment.
You have to watch out for things like management fees and also Body Corporate fees (mine $4500 p.a) which can be really heavy and as a result reduce your return. Council rates for the year ($1290) for the apartment I own is equivalent to my parent’s house which is higher in value than the apartment. Another disadvantage is I can’t really add value to the apartment’s exterior, any internal fittings must go through the body corporate.
Knowing what I know now, I would prefer to invest in houses. But if you have done your research, it could be a successful investment. I know a few people also have apartments included in their portfolio and are doing well.
Advice from a novice investor[blink]
As always, there are advantages and disadvantages. We have owned two units for over 15 years and have been very happy with them.
You must be aware of the body corporate charges, these vary enormously. Lifts are a major expense, and the more features like pools, gyms etc usually the higher the expense. If there is a manager you need quite a large number of units or costs are high. Rates are usually not much less than houses, due to most councils having a “minimum rate” regardless of the property.
On the positive side, we find our units less hassle than houses. You are only responsible for the inside of the unit, all exterior matters are covered by the body corporate, so there are fewer unexpected expenses, no yard maintenance issues etc.
Good luck!
Melbourne apartments are a bit of a roll of the dice at the moment, a lot of people got burnt buying the apartments off the plan and then realising that they weren’t worth as much as they thought once completed. Primarily due to the sheer number of inner city apartments being built (Eureka, Freshwater, Docklands, Tribecca, etc), plus it doesn’t look like slowing down, with Grollo announcing more residential in place of the old brewery, plus the south bank development, I’m steering clear.
That is not to say that there isn’t capital growth or opportunity, but the areas a bit grey as to exactly how many apartments there are going to be available over the next 3-5 years and what that is going to do to the market, also. Although I did read a report that stated that waterside/view apartments always grew at a good rate, however as to when you should buy into these types of apartments, not sure.Do your DD and see what you think.
D
Great thanks for all of the advice, I will definatly have to throughly complete my DD on an apartment before being satisfied [thumbsupanim]
Originally posted by d_robb21:Melbourne apartments are a bit of a roll of the dice at the moment, a lot of people got burnt buying the apartments off the plan and then realising that they weren’t worth as much as they thought once completed. Primarily due to the sheer number of inner city apartments being built (Eureka, Freshwater, Docklands, Tribecca, etc), plus it doesn’t look like slowing down, with Grollo announcing more residential in place of the old brewery, plus the south bank development, I’m steering clear.
That is not to say that there isn’t capital growth or opportunity, but the areas a bit grey as to exactly how many apartments there are going to be available over the next 3-5 years and what that is going to do to the market, also. Although I did read a report that stated that waterside/view apartments always grew at a good rate, however as to when you should buy into these types of apartments, not sure.Do your DD and see what you think.
D
I completely agree with you on that note[thumbsup2]
Apartments purchased off the plan are usually highly priced in my prespective. The Developers never rarely give much of a discount, due to a percentage of pre-sales they must reach before they could get finance for the project.
I won’t mention which developments, but I know some people who invested in apartments off the plan and as the time came for them to settle the property and seek finance. All evaluations came through below the sale price[ohno2]..What a nightmare.
Waterside/view apartments should always do well as long as it is in close proximity to cafe’s, schools, shops and easy to get around. People love to be closer to the waters, so those apartments should do well because they are high in demand.
[blush2]I was always under the impresion you could get a good deal buying off the plan – doesn’t look that way at all, I’ll definatly be steering clear of that idea. I’m actually situated in New Zealand (don’t be jealous) and am looking to buy probably in Christchurch but possibly Wellington. The Christchurch market is a lot more appealing. You can buy a solid three bedroom home for 250 doen there, where as in Wellington you would pay 400+ for a simlar property.
Originally posted by boon69:I was always under the impresion you could get a good deal buying off the plan – doesn’t look that way at all,
OTP worked for a while during the last boom. I should think that it isn’t a wise strategy in this climate of lower CG.
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
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