Buying a 2nd unit in a group of 3.

I own an IP unit in a single story group of 3. I have an opportunity to purchase off-market / private sale one of the other two units.

If the price is right, what might be the pros & cons of having two eggs in the same basket?

 

Pros
Can vote for things at strata meetings like upgrades to external appearance
One step away from owning all 3 units which allows you to redevelop in the future

Cons
May or may not be a good investment in its own right
Area concentration - area might perform well or badly and you're doubling your exposure to it
Fire / flood risk affects both
All the normal stuff for houses versus units

 

Hi Baker, what are your reasons for buying this apart from owning one in this complex?

Is it below market value to comparables? Though if it is, keep in mind it will also impact the val of your existing property.

 

If the price is right it would be tempting.
Concentration risk is what comes to mind.
If its ip 2 I would find it harder to justify but if its ip 12 then why not.

 

Thanks @D.T. Having a majority holding of the strata seems like it could be handy, and I do manage it already for the current owner group.

@monalisa thank you, good point regarding valuation of my IP.

@HUGH72 it would be IP#4. But let's not get ahead of myself here...


I'm unlikely to make an offer at the 'valuation' the owner has been quoted.

My original question is more out of interest - if there's anything specifically good or bad about holding more than one IP in a group; and having major share of a strata (=control?)

 

You won't always get a controlling vote with strata groups if you own more than 50% either, so there may be limited value.

I'm not hugely a fan of it, doesn't seem to gain all that much - unless it's a fantastic deal in its own right.

Getting all three has it's benefits - you can knock it down and build a hotel.

 

It's just a game of Monopoly.

 

@Corey Batt i thought you would get controlling vote if you owned more than 50%. Is there something that prohibits this?

 

Some strata bylaws will note that if you own more than 50% of a group, your vote is limited to 50% to stop bullying tactics - ie "mandatory 100k levy for every party to contribute to facade update" to try force the remaining owners into a sale situation.

 

Ah I see. That makes sense.
So best to buy 1 in yours, 1 in your partners to get around it

 

Also prevalent in some commercial buildings

 

If it's independently a good buy then go ahead.

If buying it gave you strata control, and there was a reason for wanting it then go ahead. eg My folks own a unit in an old six pack complex. Value and rents could increase significantly if the strata voted to do some improvements - they won't.

 

Strata control seems pretty pointless in a 3 unit block if you ask me.
If it's a good buy, perhaps the owner is willing to sell to you direct minus agent fees and advertising but buying a property for market value doesn't seem a great buy to me.

 

Thanks all for the replies.

An extension to the hypothetical:
If I acquired the third unit also, I would then have all three titles in the strata. Does this now give me possession of the land too, and if so would that immediately increase the overall value of the holding above the combined individual dwelling values?

i.e. would you get a boost in capital value because you own the land and the dwellings?


edit: I'll have a guess - No because the strata corp would still own the land. you'd have to torrens title the property into one to gain full ownership. yes?