Buying a existing multi unit IP

Hi Guys

Currently looking for the next IP and have come across a few multi unit property's on one title for sale in QLD, has anyone got any properties like this in their portfolio?

They look to be giving very good yields, the ones with the 'afforadable' price tag are not in the metro area but not regional either it seems.

Has anyone any experience in how these types of property preform?

Here's a example of what I have come across
https://www.realestate.com.au/prope...om.au/property-unitblock-qld-gatton-125119118

We are looking for a positive geared IP for serviceability to pair with a substantial loss in rent on a perth property we have, when we started the perth build in 2014 the rent return was valued at $420... fast forward 2 years and we now have it advertised for $280 ouch! But all lessons learned and are fine to ride out this cycle

Look forward to hearing your thoughts on this type of investment
Thanks Guys

 

I like them in theory, but I've never seen one that wasn't overpriced essentially. Unless you're getting something like 30% or more off compared to individual prices, then its probably not worth it.

I've had much better luck with duplex pairs on one title that were priced around land value because they needed a lot of work.

 

Excellent thanks for sharing your experiance
They look to stick on the market for a while so maybe room for negotiation for some of them.
I have seen that some people have had success in buying something like this then seperating each unit onto their own titles subject to approval of course, bringing the bank valuation of each unit much higher!

 

check flooding for Lockyer Creek
Units in Gatton may well be vacant over the summer uni breaks too.

 

Yeah, that's the idea - but there's so many potential issues that its probably not a good idea unless lots of things line up at once.

For example, planning approvals, building compliance and costs involved in bringing it up to scratch, etc etc.

I wouldn't risk something outside of WA myself since I'm only confident with the Rcodes here.

Honestly I would recommend either staying to something simple like a duplex on one title, or otherwise you will need to spend considerable time or money (or both) even being able to do the necessary DD before pressing the trigger on something like it.

If it was so easy, then you would imagine the owners of the complex would have done it themselves before selling.

 

Yes it's hard enough getting your head around WA Rcodes! Perhaps that's where a duplex is a bit more maintainable

 

Just remember you have multiple kitchen, bathrooms, appliances that will need repairs and replacement. So the gross yield really needs to be double digits to make it worthwhile IMO.

From memory 4 or more units you will need a commercial loan with 70% LVR might even be stricter now with the daily lending regulation changes.

 

Interesting! Thanks for the heads up
Must be why they stick on the market for so long, have been watching a few that have not bidged since the start of the year!

 

Time on market has to form part of your exit strategy - you know that it will take 6-12 months to sell.

Outgoings will be higher as pointed out eg: unless separately metered you pay for water usage, grounds maintenance and normal maintenance but you may also get some savings too like 1 insurance policy not 3

 

Bear in mind that finance may be an issue - not many resi lenders are keen on 3 on one title. As Tony said, be prepared to put in a decent deposit.

 

Me too. I love duplex pairs. Great yield. Get the underlying land. Often can be bought bat close to the price of a house in the same land but with much more income.

 

Just make sure all the appropriate approvals are in place and occupancy and any alterations legally approved by the local council.
Marg

 

Ok. So still learning...but...say a 4 unit block. One title.
If you buy a unit block on one title....less stamp duty that buying 4 separate units. No strata unit costs. If you lose a tenant...it's only 1 of 4. Low risk management for cash flow. Again...you can renovate one unit at a time....meaning less cash flow insecurities.
Future....renovate one at a time. Strata.

So...isn't the risk..management better for a block of units.?

 

@Wanttoretire there are quite a few advantages to 4 on 1 title. Just be aware that you may not be able to get finance for it.

 

CBA will lend on 4. (Not commercial)

 

Heaps of lenders do 3-4 units on a single title if its established under residential lending. CBA, NAB, Bankwest, RAMS, St George and Westpac (on lower LVRs), Adelaide Bank (they do up to 10 units on single title @ 65% LVR), Auswide (max 70% LVR), etc.

The biggest issue you have with these types of properties especially in remote locations is the lack of comparable sales so you will have issues with either the valuation price or most likely the risk ratings.

So policy wise heaps of resi lenders will take it on but you will have an issue with valuation.

 

The biggest mistake you can make is just to look and be influenced by rents, by cashflow. What if one year down the track you need to lower rents (like in Perth?)... Look at IP investment as a total CG and CF potential, and stick to your successful investing strategy!
Also, any IP I like to buy I look at an exit strategy too (just in case), will it be easy for you to sell under one title if the needed to?
I have bought a complex of units in QLD with family members (for total control of land and strata), under different entities, asked the owner to strata title - he did, and newer for depreciation...and perhaps to add future levels, one day, rezoning permitting.
Perhaps if you plan to develop and there is shortage of land, otherwise I would stay out of it IMO.

 

+1 came across a six pack the other day, barely the price of two reasonable houses in Sydney.

My first reaction was finance for 6 in one line would be a challenge, 20% + closing costs was possible, 30-35% a little more difficult, plenty of capital but poor serviceability.

Perth's a country town nonetheless you make a good point.

 

Thank you useful guidelines for lending to go off

 

I've got something similar and you do get everything in threes (except rates). So 3 hot water systems to blow instead of one if you bought a $560k house instead for example.

Also you may have some common area charges for electricity and gardening and probably can't pass on water charges.

Pros:

My tenants are older, stable as this type of property appeals to an older demographic. No damage and the rent gets paid on time. As the population ages this type of property may be more in demand.

Opportunities to develop and / or subdivide.

Better yields and lower risk of the property being empty.