Hello,
I am trying to decide whether or not to bid for a townhouse at an upcoming auction. It will be my first property purchase on my own. It’s for me to live in – so I’m not quite in the same league as those of you with ‘portfolios’, but I guess you have to start somewhere!
Particularly I’m looking for an apartment/townhouse with a minimum of 2 bedrooms, 1 bathroom and 1 car space in Melbourne, Carlton, North Melbourne or West Melbourne. I think I’ll be living there for at least 3 years, but could be a lot longer.
Here are a few questions I have:
1.) Where can you find information about average body corporate fees? The place I have my eye on has fees payable of about $2500 per year. This seems high to me as there are no lifts, swimming pool, gym etc. How can I check what is standard?
2.) I’m not keen on the brand new fancy-schmancy apartments popping-up everywhere. Especially in the high-rise towers with all the amenities – not sure why, but they just don’t feel like “home” to me. Does anyone have a view on whether a brand new high-rise apartment is likely to have more or less capital growth than a 20-30 year old apartment/townhouse?
3.) I’ve worked-out the maximum amount I can spend ($500k) with a home loan and my savings. What are your thoughts on deciding how much to spend?
The place I’m considering is well below my ‘maximum’ (probably about $350k). But I like the idea of paying-off the loan sooner. Then I could buy again to ‘upgrade’ and rent one of the properties out.
The other train of thought is that I should spend close to my maximum by buying a bigger or ‘nicer’ property. Maybe the greater the outlay the greater the gains? But I am concerned about wasting money with the additional mortgage interest I’ll have to pay.
Anyone have a viewpoint on this issue? I guess my scenario is a little different to what you normally discuss, as I am buying the property to occupy, so will not be collecting any income from it (well at least not initially).
4.) Any tips as how to predict what the REAL asking price is for property going to auction? For example, if it says $300k+, what does that mean? $330k? $360k? I know that the demand (number of bidders) will affect the price, but I just want to have realistic expectations so I can set a limit for myself but still have ‘a chance’!
5.) All the tips I’ve read so far suggest getting independent valuations and structural inspections etc. before making an offer. I’m sure this would never hurt, but would you actually bother for an apartment? (I doubt that there’d be any structural problems, and if there are I assume the body corporate would have to fix it! And it should be easy to gauge the value by looking at nearby apartment sales.) What do you think?
6.) If a property has not yet reached the ‘reserve price’ at an auction, is there any point being the highest bidder? I think auctioneers say that you will have first opportunity to negotiate with the vendor. Is this worth a grain of salt, or is it just auctioneer-speak to try to spur bidders?
7.) Any suggestions on the best place to quickly obtain recent sales for a particular suburb/postcode? I’ve seen a few advertised on various websites, but not sure if they’re all the same, or if you have to ‘shop around’ to get the cheapest/best reports.
Hmm that’s all I can think of for the moment. But any other tips you’re willing to share are certainly welcome!
Thank you very much,
ZoeHi Zoe
I can’t help with all your questions but I have heard of previous owners owing money to body corporates, sell the property and the new owner has to foot the bill. My best advice is to due very through due diligence on propertys like this and check everything before buying.Dave
Hi Zoe,
With regard to the body corporate fees, i have a friend who runs the industry association for body corporates in Victoria. Send me an email and I’ll email you back his email address, he should be able to help you.
A cheap source of campartitive sales is http://www.homepriceguide.com.au
Regards
AlistairHi Zoe
I had to chuckle when I saw your post. Except for the suburbs you named it could have been my niece posting. She is also in Melbourne and I am trying to help her buy her first appartment long distance.
I will say the same thing to you as I would say to her regarding some of your questions. Just my opinions.
1. Body corperate fees. Yes, these seem high to me. Ask the agent why. However, I don’t think you can do anything about them so take that into consideration.
2. The new inner city highrises don’t attract my niece either. They seem cold so if it’s to be your home, follow your instincts.
However, I don’t know what to think about their potential for capital growth. There are so many of them. If someone has definite ideas ,with reasons, I would also be interested to hear them.
3. My advise would be don’t spend your maximum. Given your requirements (2 BR, 1 BTHR, carspace) there is plenty around in the 300+K range. Save the rest for your 1st IP.
I’ve added the following to her list : security, balcony, sep. toilet if possible and check out the laundry facilities. Nothing worse than not having a place to put your washing machine and I’m not a fan of communal laundries.
5. Unless it’s a very old building, which given your suburbs it could be, I don’t bother with building inspectors.
I think the best way to get a feel for what to pay for a place is to do your homework. Inspect as many propertties as it takes till you get a feel for how much you are willing to pay for what you are seeing. Also check out prices of similar properties sold in the area.
6. If , at auction, the property has not reached its reserve price then the last bidder gets to go in and bargain with the owner. If they can’t come to a deal, then the agent is free to offer it to anyone again.
If you have a family member or friend familiar with auctions I suggest you take them with you. They can save you money.
Good luck.
Originally posted by elkam:6. If , at auction, the property has not reached its reserve price then the last bidder gets to go in and bargain with the owner. If they can’t come to a deal, then the agent is free to offer it to anyone again.
At a passed in auction the highest bidder gets first right of refusal at the vendors reserve. They don’t get to bargin. The second they refuse to pay the vendors reserve the agent will let other parties know it’s still available. The agent will use this as a pressure tatic… trying to convince that highest bidder they should meet the reserve as the other agent has determined there is still interest from other bidders.
I know this from recent experience.. just sold an apartment in Richmond, VIC.
Another tip.. pretend it’s for an investment. An agent or vendor will think you are more likely to walk as an investor and hence may try to bluff you less. I certainly felt more comfortable when I worked out my highest bidder was a owner occupier.
Cheers
CraigThank you Dave, Alistair, elkam and Craig for your replies!
Lots to think about… I think I better watch the market for a little longer before I rush-in.I’m not sure what others think, but it seems the market is reasonably strong at the moment in in the inner Melbourne suburbs. Quiet a few properties I was looking at have been sold, and so has everything I’ve seen at auction!
Thanks again!
ZoeHi Zoe
One other option would be to continue renting, particully if you like Melbourne or say southbank and buy an investment property instead. There are a number of advantages with this, firstly the purchases become tax deductable and secondly because you would have tenanats paying you rent it may mean you can afford to buy a second property, if not now then in the near future.
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