Hi!
I have a few questions as I am new to property investing in regards to purchasing apartments off the plan. First a little rundown of the situation:
It is a yet to be built apartment complex with secure underground parking etc and will have about 50 apartments in one compound and wont be ready until early next year. I've been to the site and construction has not started yet however some digging has commenced.
Essentially I am thinking of a 3 bedroom apartment however when I enquired with one agent, this agent tells me that certain apartments that I am interested in have been taken (via a holding deposit by other investors) whereas if I enquire with another agent, this one says that she thinks they are available. I did a search on the developer and it looks like the developer might be a foreign company however I did see some 'pictures' of their previous work which the first agent has showed me.
The apartment complex is a mix of 2br and 3br apartments with 2br taking the majority of the number of apartments. The agent told me that most of the 2br apartments have not yet been sold and that the 3br are in high demand. Construction is expected to occur in March.
Now the questions:
1) The strata to this place is $1600 / annual, along with the council rates of $800 and water being $460 per annum. The rental estimate according to the agents is between $350-$380 per week. Is a strata of this high amount normal for a apartment complex in suburbia?2) I intend to organize the 10% deposit required via a bank guarantee. My understanding is that money in my account amounting to this 10% is locked until the date of settlement of which it is paid out to the developer along with the remaining 90%. If the developer goes bankrupt or does not proceed with the construction for whatever reason will I still get to keep my money?
3) I read somewhere that in some apartment complexes I cant sell my unit without the permission of the body corporate. Is this true and what should I do about this? I think this is known as a 'free holding' strata title which means I can sell if I want?
4) I intend to stay in the apartment and take 2 other people since I am interested in a 3br apartment. I wish to charge per room, so with two tenants being present each will pay an equal amount to me which will cover the rent and water/electricity expenses inclusive. As a house share – am I allowed, as the landlord to sublet my own property in NSW. This is a very important question for me to be answered since it will help me pay off the mortgage.
5) Now the tenants which I intend to take in should have their own access cards (security cards) to the apartment complex, is it possible for me to get extra?
Thank you very much!!
Hi JayDee,
I would like to include rent return assessment in my response.
What is the asking price?
The question was legally am I allowed to sublet in a strata apartment – of course I will be charging some portion to assist in paying for the electricity/water and some portion being rent.
Hi JayDee,
You actually asked for more than just a repsonse about subletting. See quotes below.
JayDee26 wrote:1) The strata to this place is $1600 / annual, along with the council rates of $800 and water being $460 per annum. The rental estimate according to the agents is between $350-$380 per week. Is a strata of this high amount normal for a apartment complex in suburbia?It is not unusual for a developer/builder to set & estimate initial costs including strata, rates etc at a lowish level so that purchasers are not scared off purchasing. Often the strata company finds available funds tight and have to ramp up their strata fees, sometimes quite considerably. Don't be surprised if the strata fees increase in the early years.
JayDee26 wrote:2) I intend to organize the 10% deposit required via a bank guarantee. My understanding is that money in my account amounting to this 10% is locked until the date of settlement of which it is paid out to the developer along with the remaining 90%. If the developer goes bankrupt or does not proceed with the construction for whatever reason will I still get to keep my money?Will the developer accept a deposit bond? Not all do. Check the cost of getting a deposit bond V putting in your own money. The funds should be placed in a trust fund on your behalf. You will also need to check the sunset date of the contract because it is this date and not anticipated completion date that the deposit bond will need to be taken out for. The longer the time frame the higher the cost of the deposit bond.
JayDee26 wrote:3) I read somewhere that in some apartment complexes I cant sell my unit without the permission of the body corporate. Is this true and what should I do about this? I think this is known as a 'free holding' strata title which means I can sell if I want?Check to see if body corporate by-laws have been drawn up – this will answer this and the sub-letting question below.
JayDee26 wrote:4) I intend to stay in the apartment and take 2 other people since I am interested in a 3br apartment. I wish to charge per room, so with two tenants being present each will pay an equal amount to me which will cover the rent and water/electricity expenses inclusive. As a house share – am I allowed, as the landlord to sublet my own property in NSW. This is a very important question for me to be answered since it will help me pay off the mortgage.JayDee26 wrote:5) Now the tenants which I intend to take in should have their own access cards (security cards) to the apartment complex, is it possible for me to get extra?No reason why not – will come at a cost I expect.
Buildings with an underground carpark and more than four (?) storeys in NSW are not fully covered by builders warranty. Be aware of this.
And finally I would be cautious about buying off the plan at the moment. You will be required to exchange contracts before the bank has done it final valuation and before your finance is unconditional. This exposes you to changes in banks lending policies, banks being over exposed in a single development, LMI issues in a single complex, and the potential for you to receive a low valuation.
Search JackDI's posts to see what effect a low valuation can have on an off the plan purchase.
Hope this helps
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