QLD First Investment Property - OTP Chermside?

Hello,

I'm looking for some serious advice as a first time investor in the property market - your input would be most appreciated.

I currently live and work in SA, but I'm looking at purchasing my first IP in/around Brisbane with a long-term investment view of at least 10+ years and a budget of around $400-500k. (10 to 20% deposit depending on timing)

Being rather new to the market with limited knowledge about the area, I approached a property research company to seek out a property that matches my criteria and they came back offering an OTP apartment purchase in Chermside. I have received the Contract but have not signed it yet.

However, I've been doing some of my own research since then and I am becoming more uncomfortable with buying this OTP every time I find negative articles and indicators showing vacancy rates increasing, major bank cutting lending to the suburb and outlook not looking very positive due to oversupply. Families/friends living in Brisbane area have also warned me that there is a LOT of developments going on around that area. One article I read even went as far as saying only "uneducated investors" would be buying apartment unit in these areas, which seems to describe my situation pretty well.

Plus, apartments in general (especially OTP) have always made me feel a bit nervous - I always seem to hear more stories about apartment purchases gone bad with zero or even negative capital gains compared to house purchases. I know there are benefits due to high depreciation/low maintenance etc, but I feel like it'd be better to deal with negative cash flows for a few extra years for a better capital growth in the long term.

In summary, the discussion points I'd like to raise with the forum members are:
1. Whether you see potential for decent capital growth for OTP apartments in Chermside in the next 10 years.
2. If not, are there other opportunities/suburbs you recommend I should look into? (e.g. townhouses a bit further out from the CBD perhaps?)

Any advice would be most appreciated - thank you in advance.

 

I've come across your post as I'm in bed falling asleep but I'd like to give my brief opinion on your situation.
First of all I've heard that Brisbane is looking quite good at the moment as an investment option if that gives you any peace of mind. But first off you're looking at an apartment and they have their ups and downs. Obviously one of the main points in favour of an apartment is that you don't really have to worry about general maintenance. But the down side is the body corporate levies that you have to pay and depending on how big the place is and its facilities it could be quite expensive. For instance if it has a lift/lifts, pool, and a gym which are all pretty standard facilities to have in a large apartment block your body corporate levies will more than likely be quite expensive. Also the fact that it's in Queensland the body corporate does pay for the building insurance (using the money that the apartment owners pay to them) but insurance premiums on buildings in Queensland are the highest in Australia in my experience so far. eg - I am settling on a $95k unit in Townsville at the moment and since I got into the contract I am also liable for the unit so I've had to take out my own building insurance policy till settlement is over and it's costing me around $230 pm. To put that into comparison I have properties in Adelaide that are insured for around $250k and their insurance policies only cost around $80 pm.
But look into that yourself. This might only be my situation, I just wanted you to be aware of that.
If you choose to go ahead with this OTP apartment though, put in the contract "subject to bank valuation at time of completion" that way you're covering yourself if the value of it drops by the time it's built.

Also if you have $400-500k to spend I would keep looking around. You could buy two houses in Adelaide for that amount with positive cash flow.

I'm off to sleep now though. This forum is a great source of information though and I'm sure you'll have a lot of experienced investors putting their opinions to you too. But being someone that invests in Adelaide and Queensland my self if you want to ask me any questions feel free to leave your email in your next comment and I'll be more than happy to send you an email and talk to you directly tomorrow if you have any further questions.

Rob

 

Good morning Playgu

Please have a look at the threads about Brisbane, north Brisbane and other threads on PC about OTP. Also have a look at threads by Euro73 about NRAS properties if you really seriously have considered your options and still decide to buy an apartment (in a different location)

Ask yourself why the person you consulted gave you the impression (salestalk) that buying OTP in Chermside is a good idea. Have a look on Google Satellite at Chermside and other well-known parts of Brisbane for that matter and judge for yourself whether Chermside looks to be oversupplied with apartments. If you still want an apartment in Chermside, look for an established townhouse or low-rise adjacent to the hospital. Compare the asking prices and fees with the new ones adjacent to the Westfields.

I think you have good reason to be cautious. See if your local library has a copy of an older book called "Dont Sign Anything".

 

You could buy an older small block unit in a blue chip suburb Close to the CBD at that price.

OTP in Chermside? No thanks

 

Forget otp units, super high chance it will be a poor performing to bad asset. I'd be buying a house with decent land content, nothing new, and as close to the cbd as your money will take you . If it has add value potential in some way then even better .

 

No.
Walk.

 

No.
Run.

.

 

Never ever buy otp is a pretty good rule.
Chermside is good. Houses are not sitting around but I would not buy an otp unit there (or anywhere).
Buy a house in Zillmere a 3 min drive to the mall.

 

Or a unit where the house prices are expensive. After a look on online you can get a 2 bed unit in Bulimba Sub 500k. So a high rise in Chermside at a similar price would be nuts

 

At less than that price

 

Hi @Robert Petty , good explanation.

Thanks.

 

Thank you for all of your valuable input - they have been really educational.

In all fairness, I do think the OTP apartment block the property consultant is offering is a good apartment block (5 stories, less than 15 blocks, <10min walking distance to Westfield / Prince Charles Hospital) but I just can't see apartment blocks enjoying a healthy annual growth given the number of developments that are going on in the area. This opinion seems to be supported by other threads on PC - people seem to agree that there is growth potential for houses in Chermside, not apartments.

Also, based on the majority of the comments here it feels like there are other investment opportunities out there with less risk with the amount of money I am willing to spend.

I've therefore come to a conclusion that I should do a bit more research, perhaps even make a trip down to Brisbane to drive around the recommended areas before approaching a property consultant with a new set of criteria to look for a suitable property. I think I'll have to end up paying the solicitor a few hundred bucks for the work that's been done so far on the contract, but I suppose I'll have to consider it as an expensive lesson learnt for rushing into buying an investment property without proper individual research..

Anyways, based on my new goals, I'd love to hear your opinions on the following:
1. Would you guys recommend the "House-and-Land" packages some of these property consultants are offering, or should I be sticking to an already established houses in the market? (I'm not very good with practical skills and given that I live in SA, it'd be hard for me to do pretty much do anything to add value to the property)
2. What are some of the blue-chip suburbs close to the CBD area with good potential growth that could fit my budget?

Thanks in advance.

 

1. I definitely wouldn't be.

2. As per my answer above .

All Depends on your particular situation but you won't go too far wrong with a house near to the cbd as budget allows with some add value twist would be great and as large a land size you can snap, over 600sqm would be great .

Seriously don't put too much faith in all these consultants . Huuuuge conflict of interest and nowadays every Bob and Jill who can just spell the word 'property' are calling themselves consultants .

 

Brisbane is clearly "up" from SA. Look at the threads - the same suburbs come up again and again.

 

Looking at it you can buy walking distance to Oxford St Bulimba 2 bed sub 500. Can easily buy late 3's early 4's round my way in Clayfield. OTP buyers have almost zero chance in capital gains any time soon

 

Property research consultant? Or Spruiker who is likely gaining $20-$40k in kickbacks by flogging you this thing?

Who is the consultant?

 

This. I would advise utilising here for any advice above and beyond those guys.

 

Hi @Playgu

My two cents...

Be very, very careful of anyone you're taking property advice from who claims to be a property adviser/consultant/insert name here unless they are appropriately qualified and offer unbiased, fee-for-service advice. One of the easiest ways to tell is to ask them two questions:

1. How are you paid?
2. Are you only recommending new properties?

More than likely the answers to these will be "by commission" and "yes" in which case you should run a mile. These people are simply sales agents dressed up calling themselves advisers when they simply have a stock list and are trying to flog you properties with high sales commissions built into the purchase price.

They will offer you rental guarantees (which you inherently pay for), tell you about the high depreciation benefits, show you glossy brochures detailing unverified statistics that they simply make up and only sell you new house and land or OTP apartments and will be paid by the developer for selling you the property.

A true property adviser will be fee-for-service, take into account all your personal goals and situation, including your risk profile, and will detail a strategy that works for you. Most importantly, they will not just recommend new property unless it is for a very specific reason.

You are far better off to pay money for a Buyer's Agent to help you and seek the advice from a professional team who are working for you, not the developer. This includes but is not limited to accountants, mortgage brokers, buyer's agents, mentors, PIPA QPIAs, property managers and anyone who will not seek benefits by selling you a specific type of property in a specific area because that is all they have on their stock list. Be wary of some brokers, accountants and financial planners as they too sometimes fall into the category of recommending specific properties for commission gain.

In particular, OTP/new builds are very risky at the moment given the tightening of the credit policy for most lenders. I spent quite a bit of time on the phone to our finance team today and it's getting tighter by the day. Add that to the valuation risk you inherently face with this type of purchase and you're really playing with fire in the current environment.

For my money, there are plenty of areas in Brisbane where you can buy a fantastic established dwelling on a good land size in your price range without the need to have someone offer you a free service. Accept the fact that building a portfolio is hard work and be prepared to do so. There is no easy road or everyone would be successful, but by employing the right professionals around you, it can be made to be far less stressful.

Enjoy the ride!

Andrew

 

Don't buy off the plan anything in Chermside or Brisbane generally speaking. Chermside is a good spot to invest with a whole lot of stuff happening there but you want to aim for a townhouse for best yields + growth. I recently bought a really good quality 3 bed 2 bath 1 garage townhouse for 440k off a person who bought it off the plan in 2010 for 500k.

 

Thank you all for the sound advice.

I'm now considering buying something within 5km-10km of the CBD area. I understand buying a nice house with decent land within this area is probably not very feasible with my budget but it looks like units and townhouses are within reach.

However, I'd like to raise a question on one thing - what makes units and townhouses have better potential growth compared to apartments? From a property newbie's perspective, they seem to share similar traits of having no to little land, high strata/body corporate fees with high population density. (Apartments obviously having much higher density and more of them being around due to oversupply)

Also, would you guys see value in going through a proper buyer's agent for this whole process? The quoted fees I've researched seem fairly high (8k-10k), but some people mentioned the real value of having a good buyer's agent is for their ability to use their network to negotiate a really good price for the purchases - what are your thoughts?