Buy a unit lose a fortune!

I’ve noticed some sales this month come through for home units close to my office at prices much lower than up to 8 years ago.

So many people prattle on about “just buy any property and wait for it to increase” or “buy new for good tax deductions”. But the facts are if YOU don’t do your home work and set a good investment strategy, ie if just buy something for sale or through an advisor, you may end up like one of the 400+ buyers who bought in this building or many other buildings in the area.

Take a look at the purchase price and the resale price and losses, because in the end the building was over 90% rentals it took over 6 months to rent out and there are always 30-40 empty and available, with rents below the rental of years ago. If you’re looking for tax deductions this is great. No rental for half of 7 years. Capital losses. Depreciation from new. Purchase costs and sale costs.

But it’s probably not good for your balance sheet.

https://www.realestate.com.au/property//unit-228-25-north-rocks-rd-north-rocks-nsw-2151

 

Couple of things.
1. Appears to be a big new complex. New and big is not good

2. Not in a nice residental location, I'd say no to the location. It wouldn't be on my radar of location either as a tenant.

3. South facing!

The above leads to it being not a good one for growth. The current price is fair, but I still wouldn't buy it.

Also, how much do the resort style facilities add to the strata? Pool, gym, and being a big complex about 8 storeys high, there would be multiple lifts in the complex too I imagine.

 

The question is : the original buyer copped a loss..does it mean the next buyer "made" a profit??

 

If you were living there it wouldn’t be that bad, would have been paying rent all that time. Factoring in strata (depending on how much it is) and stamp duty but it’s probably not terrible. Of course as an investment it would be terrible.

 

I would say it is terrible to live there, being on the corner of two very busy roads and having over 90% tenancy occupancy. I drive past it every day and unless a kind soul lets them out of there driveway it’s hard for them to get out of the complex. It is not close to train or metro lines. They hard to resell thus the much lower prices 8 years down the track.
I think it’s very important not to assume that a 10% increase in property is a universal 10% increase as good property in this area should have doubled over the last eight years. So many people think that becoming wealthy through property is simply buying and waiting.

 

We had a unit as an IP purchased 2008 for the same price that the original owner bought in Brand new on 2001

From 2008-2016 the unit doubled in price in a space of 8 years.

4 rent increases in the same time as well.

 

It looks like you have done more “homework” on this investment in minutes looking than the buyer did in researching the purchase!
Congratulations on the wisdom you have accumulated.
This is what property investment is all about.

 

Hi @Car tart a catchy headline to your post, but of course not every unit is going to "lose a fortune" as these poorly performing sales show. Much depends on location, age, complex size, ratio of LL to owners, upkeep and maintenance costs, build quality, local supply/demand, scarcity factor etc etc. Nothing new there. I can show you just as many other complexes where sales can easily demonstrate good CG over time, even if only purchased 6-8 years ago.

What did influence the apartment market, however, back in pre-2016 was the amount of these newer complexes selling to foreign investors- many of whom probably never saw their units, except via shiny off the plan marketing brochures and were sold their IPs via expensive sales strategies designed to appeal. A recipe for disaster really.... you need owner-occupiers with vested interests in complexes to maintain and uphold the integrity of the OC and the general day-to-day happenings within a strata building. Hence one of the reasons many investors try to find out the owner occupier ratio within a building, prior to purchasing.

Also don't forget that the disincentive after 2015 (when most of these NR Rd units were sold) was the introduction of the hefty stamp duty surcharge to foreign buyers (4% in 2016 then 8% in 2017) which really put a dampener on the market....

Agree with you that this block isn't well located though- great for renters who can talk down the rent based on oversupply though

 

It also has a lot to do with timing and that comes down to luck as well. I've been extremely lucky in my investment journey.

I bought many of my Brisbane properties for below what the previous owner had paid as well. For instance I have a place in Bald Hills picked up for circa $380k ($378 to be precise). Previous owner had paid $420k and they held for many years because Brissy didnt move for 10+ years at all.

I've only had this house for close to 3-4 years and now its worth close to $600k easily now.
Did the previous owner pay toom much? Maybe....
Did the previous owner buy at the wrong time? Definitely...
Did the previous owner do their diligence and proper research before buying? Probably not.

Just because the previous owner took a massive loss doesnt mean the next one will. Plenty of factors that will influence the next sale. In saying that I am not a fan of that unit complex - I know it VERY well as I have 2 friends that live in there.

 

I remembered driving past there on regular basis when it was being built. I thought they were building offices at that time, because it is right next to James Ruse Drive (very noisy), and next to industrial offices.

Then when it was finished, I realised that they were apartments. I always wondered why would anyone would buy and live there, middle of nowhere, noisy etc. I thought it was crazy to put apartments there.

Last couple of years I drove down North Rocks road for work and always drove past those apartments. It is very hard for them to drive out of the complex because there are so many cars using the North Rocks Road. I wondered why would anyone would want to live there, unless it is very cheap.

 

Whoopty whoop 40k loss
Im sure the owners are happy to have 525k minus costs in an aussie bank account

 

Article in the Age ($) today, probably cherry picking but

Melbourne apartment owners have offloaded inner-city units at losses of up to 40 per cent in recent months, as some apartments continue to sit empty, a year after Melbourne first went into lockdown to slow the spread of coronavirus.

City-based real estate agents say smaller apartments aimed at university students have suffered some of the biggest resale losses but added that owners of larger, non-student apartments have also experienced substantial losses as vacancy rates in the CBD and surrounding suburbs soared during Melbourne’s extended lockdown.

John Sdregas from JMRE Real Estate in North Melbourne recently sold a one-bedroom apartment in Swanston Street for $180,000 – 30 per cent less than the owners paid for it 15 years earlier.

“It had been sitting vacant for nine months, and they simply couldn’t afford to keep it,” Mr Sdregas said.

“We are seeing this a lot,” he said. “Vendors can’t find renters. They are distressed, and they’re prepared to sell at a loss. That’s if they can find a buyer.”

Investors offload empty Melbourne CBD apartments for losses of up to 40 per cent

Seriously bad news for those who hold OTP contracts for units due to settle in the next year or so. I would assume that the valuers will be very very cautious.

 

ABC 'the business' had the same story on last night.

Can't beleive a poster on this forum responded to an OP and actually recommended buying a Unit in Melbourne as a strategy. The OP was considering Brissy.

How do you stop such irresponsible statements? I suppose the story above from @Tony3008 helps.

 

Thats one of the Dyldam sites (Dyldam v ATO is just one matter tearing them apart. The family is also breaking apart). The receivers are liquidating a lot of developed and undeveloped property they were carrying. Unaffected entities are also selling off by the company. Many of their development entities are under administration. There were stores that the building was 50% + unsold and rented and has been for many years with progressive sales pushing prices down. This is why "oversupply" is a issue with apartments and lenders embargo certain post codes. Cracks like that open up and its a dam breaker. The value of owned units will take a hammering. And those around it too !!

Land is also impacted but to a lesser extent as others may have interest in those large sites - But not at inflated prices !! Not too many will want massive sites at market highs. OSR wants their land tax. ATO want their GST.
Dyldam supersite listed for sale by receivers

The Parklea matter has also been a killer. I have no idea what is occurring with that massive site. Did they settle, default ?
Con Constantine takes on Dyldam over Parklea Markets

 

'Don't buy apartments,' buyers' agent warns despite big price drops in many suburbs

Suburb

Median Value

Annual fall

St Leonards

$1.028m

-8.4%

Chatswood

$1.034m

-8.4%

Croydon

$733K

-8.1%

Lane Cove

$834K

-6.3%

Arncliffe

$701K

-6.2%

Macquarie Park

$756K

-6.1%

Lane Cove North

$775K

-5.6%

Marsfield

$777K

-5.5%

Haymarket

$1.02m

-5.4%

Wolli Creek

$734K

-5.2%

 

Sorry, but was that apartment even built 8 years ago? I was living in Winston Hills back then and I think that's when they started building, so perhaps it was OTP?

It's strange how many of us seem to live in the Carlingford, North Rocks, West Penno corner!

 

I drive past this area once every week. When it first started constructing, I was shaking my head. Design is ugly. After this complex started getting built, another building was built shortly after and that one is also very ugly. Facing the cumberland highway and windsor road..the traffic is crazy there. Sometimes i go to northmead's Drummond Golf and nah, I don't enjoy driving through that intersection.

My 12 yo son asked why would anyone live there?

Another grub... heard of Stellar Ryde? See Stellar - 39-41 Devlin Street, Ryde, NSW 2112 | Domain
Based on this design, it should be demolished. It looks like a matchboxes stacked on each other. We may see the same result as the North Rocks one.

 

I am surprised they didn't go down for more, lol.
I predicted to my wife they would go down by 40% - maybe they were valued that low at one point in time.
Awful position, oversupply - all the hallmarks of a bad investment.

 

Its was OTP and I agree it was completed around 2017 but was under construct for a few years as they completed one tower and commenced the second when the first was almost complete.and was also being marketed prior to that. I understand one tower (closest to North rocks rd) has more rentals then the first which hadmore OTP sales. Council approval was May 2012 after being initiated in 2008. It sits on the site of the old go kart site that burned down on 28 feb 2012.

 

I bought a warehouse conversion in Melbourne CBD for mid 300’s. Bought early in my journey so I was still a big green. Not long after an agent had an unsolicited buyer wanting it for 500+. In hindsight I should have taken it but hindsight being 20/20 and all. However the tenant has been there all through the lockdown and is about to renew the lease for another 12 months so I guess that speaks to the livability of it. You don’t get many 70sqm 1 bedders even in the suburbs.