I am a uni student who has been interested in the property market for some time now, and instead of paying another year of rent in Brisbane, I hope to be able to get a small loan ($70k – $90k), use my savings and fhog and begin to build a portfolio. I aim to live in the unit I buy and avoid paying rent for a year, at the end of which I will rent out and gear for +ve cashflow, as this is an area I am limited in at present. I intend to do the same the following year, whilst trying to capitalise on any opportunities I can materialise. My goal (at the least) is to own five properties by the time I finish uni (2years).
There are several small studio units in Brisbane CBD. They are selling for anywhere between $80k – $125k, for more or less exactly the same thing, in the same unit block. I’ve seen one for $90k on the 22nd floor with a small balcony and river views. The real estate ads suggest rental returns of between $200pw and $250pw, thus passing the 11 sec test. I am aware there will be quite high b.corp fees.
On the surface this seems like a good deal, but if this is the case then why are they not being snapped up??? Is there something I’m missing???
Alternativly, I am also looking at a larger unit a little out of the city (5km) in the same price range which needs renovating. I fancy myself as a bit of a handy man, with a number of renovations to the ol’ family home under my belt. The expected rental return will be lower but I am told there will be much more capital appreciation here than the units in the CBD.
Any opinions, thoughts or advice will be greatly appreciated, as I have been told conflicting views of how to start, where to start, and why I shouldn’t start (and so on). But hey, where theres a will theres a way. Just looking for a bit of a street sign…
Money is an elastic resource, it can be created. Time is not.
Rent seems too high and unit too cheap!
At 90K in the Brissy CBD it must be an undesireable unit ? Why would anyone pay 250 PW for an undesireable unit ?OK so if its all true, go for it. The figures stack up as a cash flow option. Forget about capital gain though if it is an undesireable unit.
Paying rent will never help you get ahead.
Re the suburban unit. I thought most 5 KM radius units where about 150,000 for 2 beds. Same deal sounds too cheap.
Be careful. Do your checking.
MJK
Blowie, you might also struggle with a loan dependant on the m2 of the unit.
Several banks would require a higher LVR if the unit is below 50m2 thus increasing your deposit to purchase.Chris
Hi Blowie,
If these are the apartments I’ve seen advertised recently then the reason they get such high rent is that they are serviced apartments, ie available for o/night rental through onsite hotel-style management team, and yes as Chris points out, probably below the standard limit of 50 m2 in livable area (not balconies or storage areas). If it is some lenders will require a larger deposit from you or simply not want to lend to you at all.
Living in a serviced apartment building is relatively hassle free, just a bit noisy and as you say fairly high body corp fees.
The pitfalls with renting out serviced apartments can include:
1. Having to replace all fixtures and fittings (incl carpet etc) every five years at your cost
2. Locked into management contract where you may not get an even share of clients because a) your furniture is more out of date, b) your unit is in the noisy/cold/viewless side of the building (which will possibly be the difference between the $90K and $125K apartments) and c) because a dispute happens eg over who picks up a maintenance bill for a trashed room, fees in arrears etc and the management team blackball your room and there’s nothing you can do.If it is either below 50m2 or in a serviced apartment building I would ask the vendor for proof of income on the actual unit you are looking at, not the building average stats. Plus given I’m a broker and hence shamelessly biased, if you think the numbers stack up and want to proceed contact either myself or another local broker to seek out your best loan options. These are considered marginal securities by a lot of lenders and you are going to find it much harder to find the best deal on your own.
On the flip side I’ve met people who make really good money from these units, so don’t be too discouraged, you have a great attitude and I’m sure you’ll do well. I’ve also seen some one brm units around the 5km and $100K mark which aren’t in serviced apartments – again be wary of the size but probably a lot less issues than the serviced apartments.
Happy investing!
[
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Mel
[email protected]The units in the city are right near a few universities, and are rented mainly to international students. Very small (20m2) but rentable, claimed 98% occupancy.
The suburban unit is only 1 bedroom, in a good area but does need renovating.
ChrisB, I was not aware this was the case. I have about 20% deposit, lowering the loan to lower my repayments and risk (interest rate rise). And also to try and convince someone to lend me the money [
]cheers guys
blowieMoney is an elastic resource, it can be created. Time is not.
Those 90K units are probably the ones that are specifically designed for students correct? If so then they are incredibly small studios mostly. And the body corp is not just a little high, it’s very high (can’t remember the exact figures, but I looked into “uni lodge” myself once). I can’t imagine rates in the city being cheap either.
-Ian
ChrisB, St George will lend for 45sqm (but that’s still a long way off 20sqm!).
Every bank’s different and it’s not clear cut. Taking the St George example: they will look at bedsits/studios >25sqm for PPOR at 80% LVR or >45sqm for I/P for 80%. Serviced apartments are different and they’ll only lend for >50sqm at 70%LVR or <50sqm at 50% LVR.
At 20sqm I think you’re a bit hamstrung to be honest, that’s a box!
The suburban unit wouldn’t be the one in Newfarm advertised last weekend by any chance? If it’s a studio apartment for PPOR in an area like Newfarm where there is pretty strong demand for 1brm units I think you’ll have more luck with the lenders as per example above.
[
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Mel
[email protected]No, its not in New Farm… its a private sale I have sniffed out… um… elsewhere. Thats the beauty of having plenty of time (uni holidays). But at the same time having the struggle of being a student on limited income and options.
Yes, the place in the city is called uni lodge. Very high b corp, but it would seem that this would be offset somewhat by the rent collected. I have been told they are not available for overnighters (motel-like, Ive looked at these as well), but are for monthly and six monthly lease
I have also been told of a strategy where if you live somewhere as your ppor for a year, then rent it, then sell within five years you dont have to pay CGT. Is there any truth in this??? I suspect not, given the source (free, high pressure get rich seminar…)
cheers
blowieMoney is an elastic resource, it can be created. Time is not.
Blowie,
If you leave your PPOR and rent it for up to six years ( and do not establish another PPOR) then you get full exemption for the CGT on subsequent sale.
Cheers,
Simon Macks
Mortgage 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.
This is a link to the types of units in brissy cbd.
The agent has it advertised as a “positive cash flow investment”. There are many others from different agents.
Of course, it just seemed too simple. Which made me tread carefully. I was told a majority of the units in the building are owned by investors. Does any one know of someone who has an invested interest in places such as these???
cheers
-tMoney is an elastic resource, it can be created. Time is not.
The thing that makes me suspicious about Uni Lodge is the same thing that makes me suspicious about “Cathedral Place” in The Valley… in any given week there are 1-3 units being sold there.
I’d bet if you go to realestate.com.au at any hour of any day there will be at least one Uni Lodge unit for sale and at least one Cathedral Place unit [
]I couldnt agree more, hence my scepticism… I expect to invest time and hard work to find a good deal, not have one shoved in my face. And, like you said Ian, if there are other investors not snapping it up then there must be a reason.
cheers
-tMoney is an elastic resource, it can be created. Time is not.
Hi team,
Its funny, how you guys are mentioning alot of units and apartments in specific parts of Brisbane, ive had the great opportunity to see many of them and have a quick tour of them, to be honest, many of the people i know that are snapping up these types of properties are overseas students, whos parents by them the property say that they dont have to pay rent. Once they complete there studies, many of the students who bought these properties will go back to their home country.
In hence they will sell their property, make profit and the profit proceeds go back to their family to cover there cost of education, whislt studying in Australia.
Though this is one of the many reasons why Cathedral place could be selling so quick. Hope this gives a bit more insider.
cheers
s.i.sSave on a regular basis
“People forget that by saving just $3 per day and investing it sensibly over a working life, you’ll end up with around $1 million.”Hi Chris,
IS there a quick formula to calculate the LVR??
Blowie, you might also struggle with a loan dependant on the m2 of the unit.
Several banks would require a higher LVR if the unit is below 50m2 thus increasing your deposit to purchase.Chris
Pat,
LVR means Loan to Value ratio.
Basically it is the % that the loan forms of the purchase price or valuation for a refinance.
So then a property purchased for $250 000 with a $200 000 loan will have an 80% LVR.
Where in Malaysia do you live? I spent 3 fantastic years in Pulau Pinang.
Cheers,
Simon Macks
Mortgage 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.
[8]
Blowie,
Consider this left field approach – mentioned by Steve Mc at his recent Brisbane seminar (In fact an idea of a friend of his business partner).A student in Brisbane currently leases several houses in Brisbane near Unis at say $250 per week, rents out the four bedrooms per week at $100 per room making $150 per house per week to pay for his own rent/house.
This could be you. Saves you paying rent – gives you time to search for the postive cashflow property you are after while you have a roof over your head or at least get your studies out of the way without having to worry about rent. (Sure plenty of problems to find solutions for e.g. payment of electricty, ensuring they do not wreck the house if bond is in your name – but worth finding a solution for!!)
Best of luck
Tee Jay[8] Stay in Front of the 8 Ball
Interesting prospect…. I have considered this, and my initial impression was one of high risk. I then dismissed the idea, but with the mention of it I will investigate it out more seriously.
cheers
timMoney is an elastic resource, it can be created. Time is not.
I have checked this out, and I am told it is called sub-letting. Is this the correct term for what you are describing??? I am told it may be illegal. After all, why would the property owners want to rent the place out for a low price, only to have someone else come through and make a profit.
If you live in a room in the place I think its ok, but if you dont, and rent at a higher price than what you pay per room I’m not sure if its allowed. Is there a loophole or a way to get around this???
This sort of strategy would work for me in my current situation, if its workable in the first place [
]. It just seems too simple, and things that seems simple often dont work out. Does anybody know of anyone who does this???Will read responses with great interest…
cheers
timMoney is an elastic resource, it can be created. Time is not.
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