Apartment in Southbank VIC - Sell?

My wife and I have an apartment in Southbank. It's clearly not a sound investment CG wise. We bought it fairly naively when we didn't know what we were doing.

However, half the reason we bought it was due to an opportunity to do holiday-lets (short-stay). In the 5 years we've had it we've consistently turned a profit of 10 - 15k per annum (yes, profit, not a typo). It's also large for a 2BR (>90sqm), and has fantastic views across the city and docklands that cannot be built out. I'm concerned about the stock coming on the market over the next few years, but I believe the size and view of my apartment are a point of difference.

I'm just about to buy another IP, and I can see the advantage of having a CF+ property in my portfolio. We can't really afford to put in too much of our own earnings into IP's.

If you were in my shoes, would you hang on to this apartment? Do you think the oversupply of cheap, tiny apartments will have a major impact on prices for larger, quality apartments? Given that I make $10k+ profit per annum, should I just hold on to it and hope for the best?

 

Hi there, well you're making a profit. That's a pretty powerful reason to keep it, in my book.

If you were making a loss, I would've thought it better to offload it, but you're not.

If you can consistently get a profit out of it, then I'd say that might trump all of your other concerns.

That's my $0.02

 

We were considering buying an apartment for exactly this reason, I wouldn't sell if it were me...all things being equal.

How much would you get from sale proceeds and how would that help your investment journey?

 

You bought well, sounds like you bought the apartment 'everyone else' thought they were going to get!

 

Thanks for the input. I don't really want to sell, given that it's a cash-cow with literally no effort at all on our part, so it's good to hear that I'm not being foolish by hanging onto it. I think it would have made a little capital gain, but certainly nothing to write home about.

It probably wouldn't help my investment journey much to sell at this point. In fact, it may hurt, because we can't afford much in the way of losses/negative gearing at the moment, so this helps offset the next IP, which may be negative. My main concern is that prices will drop across the board for CBD apartments, and at the same time the short-stay business I rely on is no longer available to me, or viable. The chances of both of these happening at the same time (if at all) are relatively minor, but the impact could be major.

 

I know southbank very well having lived and owned many apartments in this area over the years though I own none now in this suburb. There are many streets as well in southbank I have owned in wells, dodds, kavangh, whiteman, city rd, queensbridge, southbank bvld. The prime ones are the wells and dodds and sturt streets as they were build during the area of low rise so all around those area are low rise except a few odd buildings. There is also the military base which cannot be sold off and they're next to the melburnian which is the premier tower in Melbourne. it is easy to get into the CBD as it is just one road away from St Kilda Rd tram straight into CBD in 10 minutes. The other side is something I would avoid the City Rd, Southbank Bvld, Whiteman ST, queensbridge and the rest. Especially City Rd - too congested.

There is only 2-3 apartment towers - if you are saying that cannot be build out which is on Wells street where just the field beside it is the M1 tunnel to the southern east suburbs (which for engineering reason) they can't build on top of the tunnel. if you are in the Wells Street, Dodds St area I wouldn't be selling. If you owned one of those loft apartments which some are basically 140-170sqm I would keep those as "no developer would build this again" and that is like the size of a small house in pt cook. and you're like less than 2km from CBD. Those apartments on Wells and Dodds st are known as a "gold apartments" by the local agents.

There are many apartment apartments towers that are micro sized. but ones that are large or huge are rare nowadays. Southbank has the highest turnover selling rates in Melbourne and also if you look at park st, south Melbourne where the block was held 1.5-2 million are how much they are sold for. One as recent as 2-3 months ago.

For rental returns, Not surprised as there are ppl who do this in docklands, Melbourne CBD and southbank who make 6 figure income and some only have 2-3 apartments. If it is returning decent 10-15K per year - just keep it as cashflow is good. I wouldn't be selling as they're not many places who would earn this income.

 

Depends on a few things...what would you do with the proceeds of sale if you do sell? How sure are you tht the proceeds will deliver a higher return than what you currently have?
Other considerations- how does it fit your strategy? Do you need the money to finance your next IP?
Good news is that its making a profit for you- and sounds like a decent one . How sure are you that that kinda profit will continue based on your research?
How important is CG to your portfolio, etc. Likely ( with the exception of a few streets Melbournian mentioned above), it may not see much CG in the next 5 years due to high supply incl 2 bedders.
Overall, I would probably not sell it as it is a decent cash flow, however if you believe the proceeds of sale can be better placed elsewhere, then I would sell as there will not be much if any CG in the foreseeable future for those.

 

Oops. Whiteman St is where it's at! Just on the other side of Clarendon St. I actually like this locale myself, because a 5 minute walk in one direction takes you to the city, and in the other direction to South Melbourne Market/Clarendon St village. One of the things I don't like about southbank 'central' is that it's basically just apartment towers; there's no amenities. I see being on the fringe, and close to South Melbourne as a plus. But that is my preference only, and I can see how this location wouldn't be desirable to many.

Between my 2 balconies and floor to ceiling windows and Docklands/the city is:
Normanby Rd, a boulevard with the Port Melbourne/St Kilda light rail going up the middle
Melbourne Convention and Exhibition Centre
Yarra river.

Arguably it's possible that something gets built where Normanby Rd or Jeffs Shed are, but highly unlikely in the foreseeable future.

 

I used to have apartments in 79 & 83 Whiteman St and lived in one of them. Yes I do agree it is close to south Melbourne market as a premium as I used to walk there all the time. Which floor are you on? as the lower floors you keep hearing a lot of noise from the trams and as it is next to crown you hear and see all kinds of stuff esp on Fri/Sat nights. Price wise for this pocket is not really going up if you ask me as it is part of city rd. THen being said it is ideal for short term leasing as it is not far from Southern cross station where all the airport buses go to.

 

Have you spoken to a broker about the effect of this place on your servicing. I could be wrong but holiday short stays are not favorable for lenders when assessing income.

Whilst it may be a cashcow you may find it stops you in your tracks in terms of continuing to buy more property.

Or did I read that wrong and you have an ongoing tenant with a rental agreement?

 

Keep I'd say, they're not making too many 90sqm apartments these days and if they are, they're a premium. These are the type of apartments I like, plenty of room. Location being close to South Melb market is a real bonus.

 

My broker has advised that we can use the income received from short-stay. When we used this instead of a market rate for long term rentals (about half the short-stay income), our purchasing power went up.

 

15th floor. Inside you don't hear any noise, but on the balconies you have the traffic noise form the freeway.

It's the proximity to the Convention Center that is the biggest drawcard. Many of the guests are attending conferences there. In addition, the short-stay company I use also has the 3BR next door to mine, so larger groups often book both apartments.

 

I wouldn't sell if I were you. If you did though, I'm sure there are people on the forum that would like first dibs

 

I didn't read all the replies. My thought is, how much equity do you have and how much of your borrowing capacity is held up in the apartment ? Sure it's making you a profit but is it making you a good profit? Could you invest it elsewhere for a greater profit?

 

This really highlights the state of the market. An investor is willing to cut an asset that brings a profit YoY to chase that CG dream.

 

To be honest, having one apartment which generates great returns isn't that bad while having other houses. I would hold it if I were you. being you said you can see the freeway you must at 99 Whiteman Street. as long as you have 1-2 years income - it should be fine as if it is managed by short stays (they will provide you with an updated statement). it would only stop you if you are looking to draw equity from you as it may not have gone up significantly enough. That being said - I wouldn't just throw it away if it is earning you that.

 

It's not quite like that. I want to hold on to it. It's been my plan all along, and it hasn't necessarily changed. But there seems to be a perfect storm brewing with regards to inner city apartments in Melbourne, so I put the question in here for opinions. If the general consensus had been to get out now, then I would have been putting some additional effort into re-evaluating my position of holding onto it.