Block of flats purchase

Hi all, anyone got experience with purchasing an entire block of flats. For example you get the land and own it e.g 700sqm. And there's 8 units mix of one and two bed.

As a rule I'll never buy a single unit in a flat as I believe it's a poor investment because your not getting the land. But if you buy the whole block seems like you get the land and cash flow.

Looking for any tips, ideas, pitfalls. Thanks.

 

I've had two unit blocks.

 

It’s rare that good deals come up. Some are either in bad locations that attract the worst tenants or others are priced well above what the sum of each flat would be.

 

I'm looking in 'upcoming' suburbs for price reasons so I'm expecting lower quality tenants but thought if I gave it all to a property manager I just need to allow for like 10% vacancy.

it's a good point I'll have to add up what each unit is worth then see the difference in price.

That commercial loan makes it less attractive I'll have to double check the lenders.

Skater-what's your thoughts on your unit block. Would you buy it over a normal house.

 

I've actually had two blocks of units. One was a block of 4 x strata units. Got great returns & great CG when sold. Was not in a great area, but didn't have too many issues other than crappy PM services. Best of a bad bunch for the area, so no scope to move PMs.

Second is a block of 3 plus a small shed. Next to no CG if I was to sell, but brings in great cashflow. Built of Besser Blocks, so virtually indestructable. Had a new roof a few years ago, thanks to nasty hail in the area. Never have trouble letting them. Owned outright, no reason to sell.

 

It blows my mind that you hadn't thought of this before. How would you otherwise value the property?

I wouldn't be keen unless the difference was huge (or there's some other cogent reason why the purchase is worth the hassle and risk).

 

Strata titled or one title?

 

I think it all depends on where they are located. Lots of blocks get bought, then approved for Strata & sold off separately for much more than as a single lot.

 

I've had both.

 

I think you'll find that was a flock of bats

I've also owned blocks over the years, most recently in Thailand, Gold Coast and Sunshine Coast but not holding any atm. Not much to say - finance is pretty straight forward with a lower LVR

 

Sorry question directed at the op.

 

Is it on one title or strata-titled already, I'm thinking one title if sold in one lot?

Is the land allotment a lot larger than the building footprint?

If it's an older style building then ask the REA of any known defects and repairs such as concrete cancer as possible it may be a problem that needs to be offloaded to become someone else's problem.

Get the building inspected regardless before commiting.

 

Haven't bought just started looking at this option. Would be looking for the type that doesn't need a separate body corporate, just get my own property manager to look after it.

 

Haven't found one I'm interested in yet. Is there a difference if it's more building versus land. Wouldn't be planning to demolish and develop a block of units in near future.

 

I think they offer really good investment option. Definitely better than putting granny flats in lousy locations that many are doing here to boost rental income lol

You buy at high land ratio of more than 70% to the total purchase price, meaning more than 70% goes to paying the land while you still get an old solid brick building, set and forget kind of investment and just doing minimal maintenance as you go.

Location as usual is priority. Closest to amenities, high rental demand etc. Land where CG will always be there, in big capital cities. Brisbane still provides this opportunity at the moment while it’s getting harder to get 70%, probably 60% ratio. And decades later, when the land is zoned for higher density, reap the reward getting a DA and sell to developers or build it yourself if you’re capable. Since you have total control of the block…

And if you can’t go at it alone, buy with like minded partners?

All the best

 

You would rarely be able replicate the density that's there already, so check zoning if It's ever a potential requirement. Also in an earlier post you alluded to a commercial loan. It's a commercial LVR not a commercial loan.

If buying in one line, add up the strata title value and deduct circa 10 percent. Try to buy under that price.

 

Upkeep can eat into yield tho - 6 x hot water systems, ovens etc to replace compared to one property. 6 x landlord insurance. Allow for gardening and electricity of common areas.

 

No different to owning 6 units in different areas. Cost would be lower as there would not be a strata manager, single building & contents insurance, single rates (not 6 x minimum charge + common property).