Hello,
I am looking to find out the golden rules for buying units as in investment in the metro areas of perth.
I know some of them are;
Try and get a unit with a min of 50square metres as it affects LMI
Try and get a ground floor unit
Make sure it has a carparkI am looking in the tuart hill, vic park, burswood, rivervale, ossie park, wembley, glendalough areas.
Any other good tips from forum go-ers? The unit is for my girlfriend to buy as an investment. She doesnt want to spend too much, doesnt want it to be to -ve geared. Just a nice easy first investment unit.
Whilst i agree a couple of the points you have made are useful one of the golden rules for me would be to check out careful the Body Corporate set up.
Body Corporate fees cover an administration fee for day to day running of the BD as well as sinking funds which puts money away for work to be done on the Building.
Some of the older buildings are starting to require work and the last thing for a new investor is to find that you have to pay out a large contribution to cover major works to the property unless of course this is reflected in the purchase price.
Whilst most States make provision for disclosure your BC will only disclose to you in a search of anything that has been minuted and is forthcoming.
Check the building for yourself and maybe ask another owner is there any expenditure planned such as new lift, air conditioning upgrate etc
Cheers Richard
Ph: 07 3720 1888
[email protected]
http://www.yourstatefinance.comSpecialising in US & IP finance.
Richard Taylor | Australia's leading private lender
I too would greatly benifit from any tips n general rules of thumb regarding unit purchases.
What is LMI?I’d be interested also to see if there are many advantages/disadvantages over buying separate units in a building, or buying the whole building itself.
I like the idea of units, but know next to nothing about them.
What are the yearly expense items of a unit / block of units, and more importantly, WHO PAYS THEM?
Cheers
Cabo Wabo
Cabo
LMI refers to Lenders Mortgage Insurance. A premium collected by the lender (usually dependant on the Loan to Valuation ratio) to cover them in the event of the property being sold due to default by the purchaser and the lender making a loss.
Obviosuly if you can afford or find a block of units them you might expect to get some economy of scale in the purhcase price.
For financing if the block is over 4 units then it is likely to be treated as a Commercial deal and whilst can be financed upto 80% likely to cost you slightly more in interest rate and set up costs.
Costs in buying a unit would include rates, body corporate fees and possibly land tax (varies from state to state) and you as the owner a responsible. You maybe able to pass some of these on the tenant by way of rent.
In a block of units you may find that there is no Body Corporate which will save you something however you will have Council registration for a multiple dwelling and Buildings Insurance which is not cheap.
Cheers Richard
Ph: 07 3720 1888
[email protected]
http://www.yourstatefinance.comSpecialising in US & IP finance.
Richard Taylor | Australia's leading private lender
As far as ground floor goes I think the rule of thumb is:
If there is no lift then lower the better. If there are lifts then higher the better.
Obviously an outlook plus breezes will be more desireable.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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.
Hi Cabo Wabo
The type of expenses that units/blocks incur include building insurance (plus other types of cover if strata titled), common electricity for lights in stairwells, garden, garage area, intercom, antenna etc, water usage (each owner pays water and sewer service charge but strata pays water usage), accounting fees, cleaning and lawnmowing etc for common areas, repairs and maintenance of common areas, fire safety if applicable, management fees, insurance valuation etc. These will all vary depending on a multitude of factors.
Hope that gives you an idea.
Wake
Thanks guys, i’m starting to get a better picture…. [cap]
I’m leaning towards the idea of buying a whole block of units. Whilst i can definately see myself buying single units as well, i like the idea of not having to deal with other owners regarding changes, fixups etc, and i like the economy of scale in the purchase. But you do pay a premium in stamp duty though.
Further to what you have told me thus far:
1) What increase in interest rate is associated with a “commercial deal”?
2) Is land tax based on dwelling number, block size, individual unit floor size, bed room number, dunnies, or what? What economy of scale can i expect from rates and taxes etc compared to buying a house?
3) Roughly how much is the average council rego for a multiple dwelling property and is it paid yearly, or a once off?
4) Do building / landlords insurance premiums vary much depending on whether it is a house or a block of flats?
5) Who pays for common lighting etc, the tenents of the landlord?
6) Does the tenent of a unit in a set of flats have different rights to that of a tenent of a house? …specifically, regarding inconvenience associated with renovating & maintenance?
7) Is George Dubblya really as stupid as he looks?
And lastly, do real estate agents grant you an economy scale in the management of 4 units in the same complex, as opposed to 4 houses?Full of questions aren’t i?
Thanks heaps.
Cabo Wabo
A lot of lenders won’t fianace more than 3 on a block or if they do it is considered a commecial loan so check it out with your lender first
Monopoly, my favourite game
G’day.
One thing I think is very important, is have a real look into who runs/manages the strata if there is one, if you are passionate aboute property investment, you may find that the strata manager is a burnt out retiree, who doesn’t want to help with making any improvements. then getting things done, can be a long and stressfull situation. I have a place in Tuart hill, it is 73m2 and is going well, I wouldn’t go much smaller than say 70m2 Good Luck!!!JASE
Hi Cabo,
I concur with the comment about financing more than 3 on a block. I financed 2 lots of 3 but they were on 2 blocks adjacent.
I built them and had them done ready to strata title if necessary; but i left them as flats.
i.e. one title. (2 titles adjacent in my case)This has saved me a lot of rates so far.I am not sure if there are other DISadvantages with what I did. I was looking at the rates.
Any body else?
Giddo
http://www.standrewsplace.com.auKNOWLEDGE IS POWER
Originally posted by avranjes:Hello,
I am looking to find out the golden rules for buying units as in investment in the metro areas of perth.
I know some of them are;
Try and get a unit with a min of 50square metres as it affects LMI
Try and get a ground floor unit
Make sure it has a carparkI am looking in the tuart hill, vic park, burswood, rivervale, ossie park, wembley, glendalough areas.
Any other good tips from forum go-ers? The unit is for my girlfriend to buy as an investment. She doesnt want to spend too much, doesnt want it to be to -ve geared. Just a nice easy first investment unit.
As 007 said do a search on the BC and see how it stands financially..
IMO I wouldn’t get a unit in a complex with a lift or a pool, I also wouldn’t get a unit in a group of over 12-20 units..as for me there is then to much competetion for tenants and harder to raise rents.
However, thats just me and its worked well for me in te past..however, you need to look at what market you are trying to hit and go for it..
I have a friend who has about a dozen units some in North Perth area and the others in Wembley area (with Lifts[biggrin]) and he does well with them..
CG on units has been good of late (about 42.5%in 12 months in Morley where we have one)
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorCabo.
Further to what you have told me thus far:
1) What increase in interest rate is associated with a “commercial deal”?
ONLY applicable of more than 4 units on the one title and then in some cases can be the same as residential rates.
2) Is land tax based on dwelling number, block size, individual unit floor size, bed room number, dunnies, or what? What economy of scale can i expect from rates and taxes etc compared to buying a house?
This will vary from State to State and from Council to Council. Also ensure that when you purchase a blick in line they are not Strata Titled otherwise you will ned up paying the same amount of Rates as you would if you purchased them all individually. We de-strated a block of units in Brissie a couple of years which was long term hold simply to reduce the rates payable.
3) Roughly how much is the average council rego for a multiple dwelling property and is it paid yearly, or a once off?
Paid annually and again will vary from Council to Council and dependant on things like number of toilets or bathrooms you have.
4) Do building / landlords insurance premiums vary much depending on whether it is a house or a block of flats?
Unsure suggest you check with a good insurance broker. Not even sure you can get an in line landlords protection policy.
5) Who pays for common lighting etc, the tenents of the landlord?
You as the owner and the landlord do unless the tenancy agreement states otherwise. Good luck collecting it.
6) Does the tenent of a unit in a set of flats have different rights to that of a tenent of a house? …specifically, regarding inconvenience associated with renovating & maintenance?
No All tenants are protected under the Residential Tenancy Act in your State.
7) Is George Dubblya really as stupid as he looks?
Yes
And lastly, do real estate agents grant you an economy scale in the management of 4 units in the same complex, as opposed to 4 houses?Its all about negotiation.
Cheers Richard
Ph: 07 3720 1888
[email protected]
http://www.yourstatefinance.comSpecialising in US & IP finance.
Richard Taylor | Australia's leading private lender
The golden rules is to do your research depending on the area demographics and type of tenants you are attracting and research the development for apects, layouts, sizes, returns ect.. I justdon’t think there is a one rule that fit all… All must be evaluated according to it’s merits.
Also it’s important not to limit yourself to units only, what about house & land ect??
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!
Qlds007 (Richard),
I appreciate your itemised reply… thankyou.
Cabo Wabo
We’ve just sold a unit (in a complex of 17 with a pool). Value has doubled since we purchased two years ago. Main reason for selling was a special levy being introduced over three years to repaint the complex. This, on top of the normal body corporate fees and rates, made it just not worth hanging on to. Personally I wouldn’t buy more units (we still have four). I feel that Body Corporate fees are a bit of a rip-off as the majority goes into Admin fees. I wouldn’t mind so much if more went into the Sinking Fund.
I know that the Admin fees cover insurance premiums but what else does it normally cover? Can anyone enlighten me?
Thanks
ShirleyMy current lender tells me that in the instance of where multiple dwellings are on the one title, then they won’t go past 65% LVR. Another bank said 70%. This could be quite restrictive i’m thinking, so i’m looking into it.
Has anybody else go lil handy hints regarding purchasing units etc? I’d like to keep this string going for as long as possible…. its a goodn…
Cabo Wabo
And lastly, do real estate agents grant you an economy scale in the management of 4 units in the same complex, as opposed to 4 houses?
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