Has any one ever bought an apartment as a investment?

Hi JP,

Never bought one – probably never will.

Being OTP there will be significant financing issues you will need to consider as the vendors and their contract will require you go unconditional within 30 days (or similar) BUT the bank will not provide unconditional finance until they can value the property – and this only happens right at the end when the property is completed.

In between time you have either gone unconditional or at the very least signed a contract which you haven't been able to fulfill and are therefore at the vendors discretion to re-sell as you haven't met the terms and conditions of the contract.

Another issue is that estimations for body corporate and rates provided by the developer tend to be on the low side so the purchase of an apartment appears to be more attractive to prospective buyers. When the property is completed the strata fees, in particular, get significantly ramped upwards thus making the investment less attractive.

The value of your apartment will rise and fall with the market. There is not a lot you can do to influence the value of your investment.

Some quick ones off the top of my head.

personally what I don't like about new apartments is the strata fees. it eats up alot of your rental income profits

Also, investing in a home can be good; it can also work out well for investors if they decide to invest in an apartment. An investment for apartment is best, if you find a good deal for one located in the middle of the city.

Hi all,

I'm amused by the negativity concerning apartments as investment. I'm soon to begin construction on a small block of 10 in the outer East of Melb (no not advertising here). It seems that in some circles apartments are in vogue for investors. High depreciation (low land content, high building content) and in the right areas tenants are thrilled to be in new builds close to amenity. Particularly these older suburbs with heaps of dated housing stock.

I think the apartment Vs house argument has been long skewed to houses because the only apartments available were dog boxes in the city. Now with the urban infill change going on in Melbourne and smaller more boutique apartments being built in suburbs further out from the CBD, are apartments still a no go? I'm interested, partly for buyer sentiment but also from a change in mindset and demographic point of view.

 For awhile there, townhouses and units were the devil, no one wanted them, people thought only poor people would live in them and everyone said, 'too small'. As the price of stand alone homes rose, people started buying units. Will this happen with apartments?

I think it will. I'm not saying I love all apartments, I do love scarcity, value for money and high yield, as well as a nice prospect of capital growth. But having said that, I have a tiny unit, and it's nailed all my other properties for generic growth because of the location.

It's interesting!

Cheers

D

If the body corporate is handled properly, it can be very reasonable … we have done some deals on a Sunshine Coast Apartment complex right by the beach … and the body corporate is only about $2400 p.a … rent return is in the range of $520 – $550 p.w v’s about $600 p.w repayments at $80% LVR. Rental vacancies are also very low in the complex. I think apartments can be very good if you pick the good ones, and you know what you are looking for! I’d also suggest negotiating a buffer on purchase (from the vendor) to that you are comfortable for a few years with any shortfall as there is unlikely to be much capital growth in the next 2-3 years in many areas (ie buying under mkt value).

I avoid OTPs with a passion.

If I'm going to make a purchase .. I'll purchase what i see and feel and touch. And thats worth the stamp duty saving to me.

OTPs sell on hype. I dont buy hype in the stockmarket .. and I am not going to buy hype in the property market.

However .. to correct myself on the above .. I will purchase into up and coming areas with a market need for apartments.

Sounds contradictory? Not at all.

With an OTP you rely on pure speculation as to its finished product and potential. Thats a gamble, as you are reliant on developer following thru (not always the case), a trust in the quality of the finished product, and a guarantee of tenancies.

With an ongoing trend of an actual requirement .. the OTP is not such a gamble as you already know there is a need for the property approaching due to <insert need here>  so all you are doing is matching the new demand with a property.

Dont make the assumption that just because there are apartments in the area .. yours will be desirable too. Make the enquiries and learn what people are asking for from the property managers .. make a better and educated judgement call.

This is exactly the interesting part.

It's interesting what xdrew is saying about not being able to see or touch. So we know a portion of people will NEVER buy off the plan. I don't see buying off the plan as speculation.

I'll put it from my point of view. I know as a developer how long it has taken to get approved (long time) I know how much captial has had to be poured in (lots) so I know if I don't finish and get the product correct to the buyers satisfaction, I don't get paid. So from a risk point of view, the buyer puts in maybe 5% deposit, which gets stashed in the real estate agents trust account till much later in the piece. Not much risk, maybe opportunity cost if the deal goes under.

As the developer, if the deal goes south, all the money is gone, theres no going back. So rather than speculation on the part of a buyer, it seems to me like a small risk, the kind a person would undertake in a standard deal anyway.

As far as price increases in apartments and speculation, then thats another story. I wouldn't call people who are crossing their fingers for capital growth investors, rather plain speculators. And as said above, it all sounds like sharemarket (or gambling).

I think if the return is there, then it's a good deal. And then it comes down to being an unemotional investor.

I found what WomeninPropMelb said to be very interesting from a demographics/demand point of view.

I worked in the big box on the corner of Ballarat and McIntyre Rd, in Sunshine, many years ago and Sunshine needs a nice big redevelopment, and it has done for awhile now. It is an easy commute to the city and that whole corridor could do with revamping.

Cheers

D