Hi Everyone,
Tomorrow I am looking at a 1 bedroom studio apartment in the CBD (46m2). the unit is a old school warehouse style but was restored 5 yrs ago. It has timber floors, high ceilings and staining steel kitchen appliances.
I am going to view the property tomorrow morning and am looking for any suggestions on things to look out for with these types of properties. E.g. how would I find out if it is heritage listed and what are the pros and cons of this scenario. Generally any feedback on this type of property would be greatly appreciated!
Thanks to everyone in advance [biggrin]
Sacrifice
Understanding
Committment
Character
Excellence
Satisfaction
Structure
= SUCCESSPros:
– low entry price
– good gross yieldCons:
– Banks don’t like them, especially under 50sqm. Because of this your LVR is going to be lower (60 to 70%??), negating the low entry price pro.
– High risk of poor capital growth
– Low scarcity factorHey shake-the-disease,
Thanks for your reply, they are good points that I have considered. I am not planning on selling the unit any time soon, so am not really after the capital gains. I just thought it would be a good entry into the market – and if it generally isn’t costing me anything from week to week I thought it might be a good idea.
As for finance, I have spoken to my broker and he had the same concerns about the banks not being too happy with the size – however on that note he did find that Commonwealth and Colonial were willing to do a 95% lend on this property.
Thanks again for your comments – I will keep everyone updated as things progress – wish me luck!!![thumbsupanim]
Sacrifice
Understanding
Committment
Character
Excellence
Satisfaction
Structure
= SUCCESSHello,
Can i ask what city this was in?Being a warehouse conversion may also be a problem. Has the bank done a valuation yet? If not, take care in case they may backout.
Terryw
Discover Home Loans
Parramatta
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Originally posted by InvestorInTraining:I just thought it would be a good entry into the market – and if it generally isn’t costing me anything from week to week I thought it might be a good idea.
Hi IIT
This comment makes me wonder whether or not you have fully though about what you want to achieve and how you are going to do this.
Simply buying something because it is a good entry point needs a rethink.
What are your long term investment goals, how are your investments going to support you later on, what is the exit strategy, financing these properties, you lifestyle and income limitations/advantages and so on. All of these come into play and need some answer before making the first step.
Cheers
Derek
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http://www.pis.theinvestorsclub.com.au
0409 882 958$240/160k buy is a straight 7.5% return. What rates and body corp fees do you need to pay? You may find the deal isnt quite where it started out from.
Secondly expect a high deposit for sure. I have heard recently that Comm bank are doing 38 mtr 1 bedders on an 80% lend so may be worth a chat with a broker.
Good Luck
DD
Buyers Agent (Dip Financial Services(FP)
Don’t sweat the small stuff,and it’s all small stuff!!Thanks for everyone’s interest . . .I have an update for you all.
After looking through the studio apart. I found out that there was a 2 bedroom for sale in the same building. Here are the stats:
2 bedrooms (decent size)
approx 70m2
Fully furnished
$3000 body Corp/ $1200 rates/ 8% mgt fees
Has a 6mth lease for $340/week
I much prefered this one to the studio – it has a great feel to it and has lots of natural light.
Derek: Thank you for your comments. My long term investment goals are generally to build a large property portfolio, I think I will general focus on inner city fringe suburbs, with houses that simply ned a bit of tlc. But am open to other opportunities, such as these apartments. I work in the CBD and am currently living at my partners parents place so wouldn’t mind moving into the 2 bedroom anyway – so if it wasn’t tenated then I would happily move in with my partner, and am confident I could handle the repayments. My income is fairly low at approx $42k but am expecting that to rise to approx $47k within this year.
I must admit I haven’t really thought of an exit strategy – as I never really wanted to have to sell the unit as long as it continues earning. But I suppose if interest rates go too high and the rents don’t rise accordingly I would probably want to sell. What are some exit strategies that I should look at?
DD: Thanks for your comments as well, my broker said that commonwealth and Colonial would be willing to do a 95% lend on the apartment, and is confident I have enough deposit. Same applies for the 2 bedroom I am now looking at.
I haven’t had the bank valuation done yet – but I am aware of the potential problems there, so thanks Terryw I will approach with caution . . .
Sacrifice
Understanding
Committment
Character
Excellence
Satisfaction
Structure
= SUCCESSGreat news about Colonial too nice so I can pass that on to people looking for 1 bedders. Go with the 2 bed if possible but I dont know the asking price and the body corp fees are a high ongoing cost to be aware of.
I tend to look for smaller blocks with low body corp fees and of course good returns. In a lot of cases the gross return of 8 or 9% is erroded to 5 or 6% by all of the usual costs including rates as well as any maintainance. Just do your figures properly and you should be right.
Good Luck whatever you choose
DD
Buyers Agent (Dip Financial Services(FP)
Don’t sweat the small stuff,and it’s all small stuff!!
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