Dear all,
I'm really new to this and have gotten rather lost recently…
I'm looking to buy a AU$350k 1 bedroom apartment in Southbank, Melbourne, off the plan, as my 1st investment project, and have received mixed comments on this decision.
What do you think of this? Do you think there is potential for steady rental income and maybe capital appreciation?
Thank you in advance!
Hi
Have you done your figures on what the property will cost you out of your pocket a week to hold, with strata etc
Had a quick look on RE.com and saw 2 others under 300k
If it is off the plan look at the storage areas etc, cupboards etc, if the tenant has a bike what do they do with it.
Melbourne has had a big capital increase, will it continue, when is completion etc
Barry
Just be careful that it is enough square metres to meet maximum bank loan criteria
Also check the plans carefully and ensure that it is clear of what you are buying in respect to layout, fittings, floor coverings etc & size of rooms INCLUDING ceiling height etc.
There was a legal case sometime ago with a Southbank building where the ceiling height was reduced in order that an additional floor could be squeezed in !!
As already said do your homework and figures VERY carefully as the value of the property could reduce once completed (has also happened in Southbank/Docklands area) as you may then have trouble obtaing finance as lenders will take the lesser of either contract price or valuation (on completion). The reverse could also be true and a good capital increase can also happen
Usual minimum size for most lenders is 50 sqm and some may also restrict the LVR due to number of units in the area and the lender may already have a large exposure
These comments are only my opinion
If you plan to sell relatively quickly, be wary of the rate of capital growth and the effect of CGT.
Each comment above is valid.
You need to do the research. I would be reluctant to direct a client to such an OTP property as a 1st investment. You would be better looking at more a boutique development of 4 to 20 apartments in inner suburbs, where once completed, you will have a mix of OO and Investors, where not literally hundreds of apartments will be coming onto the rental market at the same time etc.Lenders don't like the Southbank area and restrict lending, so borrowing is tougher, revalue and refinance strategy will be harder. It doesn't mean it won't work, it just means the probabilities are higher that it will be more difficult.
Good luck
GregThank you so much everyone for your comments, I really appreciate them…
I am seriously getting worried about this investment, when I was sold into this, the agent told me I should expect positive gearing of about 8%, and that loads of investers will be keen to buy it over from me should I want to sell.
Gred Reid,
Would you be so kind to explain why lenders don't like the Southbank area? I was told prices should remain fairly constant due to the proximity to the city.
KateMelb,
Do you think capital growth is not expected within the next few years?
MarJac,
Thank you so much for pointing out that usual minimum size for lenders is 50 sqms, I will definitely have to consider this seriously as the apartment is only 49 sqms.
basbog,
Yes I will have to check on the storage, it seems storage is an additional sum to pay.
Lenders and mortgage insurers generally have post code restrictions in high density postcodes. Melbourne has these as 3000-3001 and 3004-3009. It is where a security is in a development of 30 to 35 units or more or greater than 4 or 5 stories.
It is about perceived risk and if they need to sell because you default, will they be able to readily recover their money.
They will drop there lending down to as low as 60% but it will depend on the lender. If you combine that with small size, you are not ticking the boxes.As I said, it doesn't mean it won't work for you, just be aware of the potential risks.
The positive gearing of about 8% sounds very strange, do the numbers to make sure they add up. I am not even sure I understand what that means in dollar terms. Perhaps he is including projected capital growth but that is not a direct contributor to what I understand gearing to be, it is income less expenses being either positive or negative.
An 8% rent yield equates to $538 a week in rent.
I would be interested in seeing the numbers. Did they do a financial projection for you? Many use PIA to do that but I don't see a positive gearing number from that software.
Greg
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