Hi all,
I'm fairly new to property investment, and currently in the process of getting our first property in inner metro Sydney NSW
we had a fixed priced around 480K negotiated and accepted, and have got the strata report already. However, there are few things that made me uneasy.
– The property has 88 lots, but with the balance of strata admin fund in negative (-28K) and sinking fund of (32K), further look into the details showed that most of the negative came from lot owner owing money for that quarter (plus few lots carying larger debts).
– there had been issue with burst pipe causing damage to gyrprock and skirting on several units, and the one I'm looking to purchase also had the same history but repaired under insurance in 2011.
– looking at the expenses for building issue, every year there are issues like electrical, intercom, plumbing, and lighting . which doesn't cost much, but in the range of 2 to 5K .
– based on the meeting minutes, here are also plan for the whole building inspection to check the issue of water leak which might get quoted of around 20K
would anyone give me a proper insight into whether this is normal for property in the age of 4 years? and whether I should proceed or withdraw with this?
Thanks heaps!
Hi there
I'm no expert in reading strata documents but that negative $28k balance for the admin fund would make me a little uneasy. The sinking fund doesn't seem too healthy either given there's 88 units.
With the pipe damage – it sounds like it's been sorted so I personally wouldn't worry too much about it. Get a building inspection done though so you can get some independent advice.
Those expenses for electrical, plumbing, ect are normal and don't seem too excessive.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thanks Jamie, that's helpful to know regarding the building issues. I just hope that it is not a major issue with the building, even if it does, it would be the responsibility of the builder?
yea true that the balance of the whole strata admin is quite worrying. Anyone else had experience with negative balance on their strata fund? I'm just worried that if something happened with the property in the future they might suddenly increase the strata levy because they don't have money in the balance? how does insurance play role in the whole sudden expenses?
Dan
It is not uncommon to have a negative amount in the Admin fund depending on the Accounts have been prepared.
Remember Levies might be due on the 1st of the month but if they are not paid and received until the second them the Admin fund could show as in arrears.
Certainly with 88 lots in the complex this could well be the case.
Personally i would ask for a copy of the last years Annual General Meeting minutes and see what they reflected.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
On a separate note i realise that the property is only 4 years old.
I am unsure whether buying something with issues after only 4 years is a good investment or not.
That's my 10 cents worth anyway.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
thanks Richard for the advice, I checked and it seems to be the case with the negative admin fund, most of the negatives came from arrears of levy payment from tenants.
The strata had insurance cover and as far as I know generally it covers the first 7 years of the property? so does it mean, let's say if I bought the property and something happened in the next 3 years to the building, the insurance will cover it?
Hi XDans,
Like Richard – those sorts of faults in a building 4 years old is not a good sign. It will need further investigation.
You also need to double check the building warranty issue. From memory (and it has been a while) if the property is multi-story (above 4 storeys) or has an underground carpark then you may not be covered by the 6/7 yr warranty. I suggest a call to the NSW building authority.
But in answer to your query, warranty cover, if it exists will transfer to the new owner.
Thanks for the insight Derek, I'm planning to have a closer look (second inspection) at the property this weekend. the thing is we are looking for a place to move in and size+location wise they are just perfect, might need a bit of renovation (repainting etc) to suit our needs, just need to make sure that the strata issue won't cause a huge trouble in the future.
No worries – make sure you are extra diligent on this one.
4 years is very young to have problems of this nature.
I might add with 88 units in the complex your capacity to add value and outperform the other ones is very limited. In many respects your growth will impacted (negatively and/or positively) by all the other units in the same building and also those nearby.
Make sure your unit has something different; a view, large balconies, larger rooms, extra parking, etc
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