I know nothing about Griffith but I do know unit blocks. Be aware of the following and factor into your holding costs:
– More than four units means Commercial finance, not Residential. And this means a higher interest rate.
– Not all lenders will finance unit blocks of this size, so you'll need to do your homework on who does and what the interest rate is
– Not all insurers will cover unit blocks with this many units. Try GIO and Terri Scheer. Maybe there are others. Again, do your homework. Further, be aware that from the slim pickings of insurers, some will charge a separate policy fee for each dwelling. That gets really expensive.
– The regional water act (the one that applies to Victoria anyway) permits the water company to issue separate service charge bills PER DWELLING even if the whole site only has one water meter. Again, expensive. And by the way, the local council probably does the same. Place a call to both and ask, and also insist that you see the MOST RECENT water and council rates bills for this property.
In a nutshell, holding costs of unit blocks are high. Further, by their nature they tend to be older buildings which means older plumbing which means you tend to have to pay for a plumber to attend more often than you would think. For example, tree roots are always getting into the old terracotta sewage pipes.
Chat to the council about whether the unit block could, if desired, be strata titled (I am assuming it is all one one title still). Ask what would have to be done, and who you could speak to in order to understand some ballpark costs. This is very important because it offers you an alternate exit strategy. Carve up to several titles and sell the units off individually.
Here is where your assessment of the market comes into play !
Take a look at the whole realestate.com.au (or similar) list of properties out on display in Griffith.
Notice anything?
No? Missed it?
Griffith is a regional RURAL based economy. (well .. sounds obvious .. ya?)
And there are a heck of a lot of farms up on the market at the moment. (oh ! So THATS what he's on about !)
Balancing that out into a summary .. you've got a lot of farmers who are selling up and getting out for one reason or another. And for the longer term history of Griffith .. that does not sit well.
There are some GREAT blocks of flats hitting the market in recent months. And having done my due diligence on the place .. its a nice town .. but .. trouble is on the horizon. And since i bank my money on longer term trends .. that's a bad sign.
Also a great looking block on Canal st .. and another one on Wakaden st, both returning 70k roughly apiece. High returns .. but with the current trendline in Griffith .. proportionate risk.
Dont be shy with not having seen this sort of thing. It just comes with time and experience. But more people would be impressed with the sound of a positive return than the actual facts as they are.
Rural sector picks up in that town? Jump in !
But until then .. make your judgement calls on the side of caution. If you do invest .. dont be dependant on it.
My experience with block of units is slightly different, and i think they are one of the best investment in terms of rental yield;
– You can get residential rates up to a block of 6 with no issues.
– Block of 7 and 8 can still be within the residential space, but it needs to be a 2 bedroom units only and in a Cat 1 location.
– The above only applies to single title…if the title is split then it gets a bit tricky
– Stamp duty is normally a touch higher, compare to buying one by one as the stamp duty is "aggregated"
– Subdivision is sometimes possible, but depending on the council they will require a min number of car space, making the doors fire proof or fire safe, exit strategy within the building, new plans and one of the largest cost will be the pumping and drainage…it cost me $75,000 to subdivide a block of 6 in 2009.
– Maintenance can be costly, as Jac M mentioned they are normally older style apartment with no lift and over 50 years old – also since there is no "Strata" it's normally self managed or managed poorly by one agent.
– You control your own "strata" and cost…
– Rental increase is a beauty! with block of units…small increase of $10-15 can easily multiple to $60-80 extra per week + discounts on agent fees
– One thing to mindful regarding these older style block of units…most will not have separate water meters …so you as a landlord end up paying for the water!! however it's cheaper to get Sydney water to change and add the meters in.
$75000 to strata, wow, I didn't realise it would be so costly.
Just on your last point about the water… Do you mean you can get the tenants to pay for water if you can put in individual meters? How much would it cost to get the extra meters fitted?
Hi Rusty, I know Shape will reply but here's some info from here:
Price of water meter depends on if it is a regular one or a radio-controlled one. If it has to go in the backyard because that is where the water pipes are, the water meter reading guy will have to read the meter by remote from the kerb. A radio controlled water meter is about $350 in VIC plus a bit more in Water Company fees and of course plumber installation fees. Yes you can then pass on water charges. The water usage would have to be pretty high to bother or the cost of installing the meter is prohibitive (water usage on a one bedder is about $35 per quarter).