Advice please on the pros and cons of buying a block of units

I have 7 single dwelling investment properties and am now considering investigating blocks of units in either NSW or Queensland, any advice on the pros and cons please?

 

Pros - you have your own land, better yield, may be able to do renovation and apply for strata title.
Cons - higher entry price, probably need to apply for commercial loan for more than 4 units in a block.

Personally I will try to find a block of units for further development potentials (e.g. able to add extra units, or demolish and build high rises).

You may also want to refer to the following link from somersoft:
http://somersoft.com/forums/showthread.php?t=65313

 

If you do buy the block you will have interesting owner corp meetings, parents own a block and all they do is talk about their trips and how the children and grandchild are doing then they walk away ticking a box.

It is amazing everyone either agrees with whatever proposals are presented by members.

 

I have owned a few blocks over the years. I found it great as when one is empty you still have the rest paying rent I have always bought blocks that have not been strata titled, as this has kept the costs down. Rates and insurance have been cheaper than for individual strata units. Also no Body Corp meetings or Strata Management required. Mine have always been interstate, so when one has become empty I have flown up and stayed there and renovated it. It also gives you an idea of what the other tenants are like. I also found they went up in value a lot higher than individual units, as you multiply it by the number of units you hold.

 

In addition to what the others have said:
Pro can also be that if you buy un-renovated and un-strata titled there is plenty of opportunity to make money if you do a reno & strata title. (make sure fire-walls in place, car parking etc)
Con can be you find yourself paying Land Tax from the very first block you buy.

 

Tip re strata titling - great to increase equity, but rates go through the roof. (No strata = One lots of rates paid for entire unit block. Post strata = rates X by how many units you have in the block. Can kill cash flow)
So be mindful of that and work out your strategy before strata titling.

Finance on more than 4 in the block used to be different LVRs and sometimes higher interest rates. A great broker can advise more on the finance side. I'm out of touch on the unit blocks as things change so fast in the finance world.

 

I have a good history with ING and just had a discussion with them regarding finance on a block of units. I was suprised they wont consider a block with > 2 units on the same title as they deem the loan to be a commercial loan.
Regardless of the size of the deposit or security I offered they turned me down.
Missed another opportunity...

 

Many lenders won't look at more than 2 on one title and will make you go through commercial - especially lenders like ING who are are very vanilla in appetite. If you are thinking about units, get your finance lined up first to avoid missing a great deal.

 

ING generally aren't a good fit for investors. If you just have the one owner occ and want to smash the mortgage - then they can be a good option. If you're looking to invest in property, extract equity, etc - then ING is usually not the answer.

Having said that - 7 on 1 is going to be tough to place with any lender under resi terms. There might be a mortgage manger with an appetite for it.

Cheers

Jamie

 

3 units on a title = Bankwest, RAMS, St George, NAB, CBA and Heritage (although I have never used Heritage)

4 units on a title = Bankwest, RAMS, St George, CBA

5 units on a title = RAMS (case by case with equates to better have a strong application)

This applies to both existing and construction - the only exception is CBA who will not do more than 2 units for construction.

One of the biggest issues with multiple units on a single title is valuation and comparable sales.

 

The only thing I am finding is that all the repairs come at once e.g multiple of ovens and hot water systems!

 

Thanks for the advice guys, im now better prepared for the next one...

 

Oftentimes lenders want to diversify their risk and committing to a unit block plonks all the risk in one block
Each bank has different guidelines where a commercial loan will kick in