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Engineers report

Discussion in 'General Property Chat' started by Miss Schultz, 2nd Jul, 2016.

  1. Miss Schultz

    Miss Schultz Member

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    Hi all,
    I am still trying to buy my first property and I was about to pay my deposit when the Engineers report in the Strata report came through showing there was $6.5 mill in works that were needed. This equals at least an extra $110,000 in special levies that would be paid if they were to go ahead with all these repairs, though i can't see them not doing these repairs if they are required. Also, who knows how long it would take to collect these levies - a year? 5 years? 10 years? Would you still go ahead with buying the unit or do any of you know anything about engineers reports?

    Thanks
     
  2. wombat777

    wombat777 Well-Known Member Premium Member

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    I'd keep well away personally. These are cost estimates only as far as I can tell.

    In rectifying issues there may be other issues uncovered. This is where a cost blowout could easily occur.

    Look for something with less risk or with risk you can manage/mitigate easily.

    You are likely to find better capital growth with a townhouse or house. If that is outside your budget in the area you want to buy, buy elsewhere.
     
    Leo2413 likes this.
  3. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Agree with Wombat. If the repairs will cost anywhere near the estimate, you'll probably see a lot of owners putting their properties on the market to exit the strata in the near future. You may end up holding a lemon.

    Go for something without that risk.
     
  4. Miss Schultz

    Miss Schultz Member

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    Thanks for the replies. I did run straight away at my solicitors advice as soon as i saw that, but now that i'm still looking and I can't find anything else, i guess i just wanted reassurance i did the right thing.

    Thanks again.
     
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  5. Scott No Mates

    Scott No Mates Well-Known Member

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    Is the vendor willing to drop the price by $110k? In this instance my preference would be running spikes & starters blocks.
     
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  6. Russ

    Russ Well-Known Member

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    I agree but these are also interesting opportunities to watch. I've seen units within strata buildings with defects, legal fights, and legal fights over defects increase in value when the issues come under control.

    It's true that the situation will scare off most buyers, and the value should drop by the present value of estimated expenditure, but the market can over-penalise. These units might go very cheap, and when they 'turn a corner' the value increase. With buildings in legal fights, achieving a resolution unlikely to be appealed can be that moment when the seemingly bottomless-pit of expenditure has bottomed out.

    With defects, adopting a well developed plan to address them - possibly involving a combination of higher levies and the use of finance (to smooth out the cost over a longer period) - to address works in a schedule can be that moment. It's like a smaller version of buying a badly run company and turning it around (but in Australia recently we've seen more of the opposite).

    Keep your eye on the building. If units get cheap enough, maybe you can make some money when it turns the corner. But it also depends on the other owners and the committee - which is hard to get a feel for as an outsider. If the lunatics are running the asylum they are their own worst enemies and can defer or prevent that good outcome from being achieved.
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    @Russ - the market penalises for uncertainty. Once quantified you adjust your expectations (up or down).
     
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  8. Ted Varrick

    Ted Varrick Well-Known Member

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    @Miss Schultz , maybe offer $150k less to have a buffer for your risk.
     
  9. datto

    datto Well-Known Member

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    6.5 million? Wouldn't it be cheaper to demolish the building and build anew?
     
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