Majority share in Apartment block

Discussion in 'What to buy' started by Jez, 26th Aug, 2018.

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  1. Jez

    Jez New Member

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    Hi Everyone.

    Longtime forum reader here, looking for some property strategy thoughts.

    I currently own an apartment in a small block of 6 units (2 bedders). An opportunity may arise in the near future to purchase an additional 3 from a co-owner, taking my ownership share to 4 out of 6.

    The block is very well located in the inner northern suburbs of Melbourne close to all amenities, multiple modes of public transport etc. It is 2 minutes walk from a major shopping strip/tram line. The block is about 5 years old. From a cash flow perspective, the new purchase apartments will be neutral at the moment. There may be some additional tax benefits due to depreciation - I am not factoring this in.

    Is this a good strategy for a medium/long term hold (assume serviceability is not a problem).

    Alternatively, I could keep looking for a standalone existing house in a similar area. Won't generate as much income but I will own as much land component as I would with 4 out of 6 apartments.

    Thanks.
     
  2. thatbum

    thatbum Well-Known Member

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    I think that's the wrong way to think about it. Having the "same land component" means nearly nothing because you don't have the same control over what can be done with the land.

    Anyway overall my view on buying in the same complex or neighbouring houses is pretty much the same - unless 1 + 1 = 3, then its not worth it.
     
    Ketsle likes this.
  3. Morgs

    Morgs Well-Known Member Business Member

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    We've thought the same in the past and having control over the body corporate / building due virtue of having more ownership. Fact is that you can lobby the other owners around whatever agenda you might have. Unless there is significant development upside from owning the whole block I don't think it is worth the exercise. Particularly in the finance environment we are in now, many lenders won't like you having a majority holding in a single block.
     
  4. Jez

    Jez New Member

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    Thanks for your thoughts @Morgs and @thatbum.

    My longer term view is ownership of the whole block, mostly as a passive income source. But due to current likely yield, this is not looking overly flash.

    Also, there is no guarantee of the other 2 units being available to purchase later down the track, and the block is relatively new, so dev opportunity (including renovation) is not really a realistic avenue for quite a while yet.
     
  5. Property person

    Property person Well-Known Member

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    talk to the owners of the other two first and get an idea as to whether they would be interested in 'joining' i'm assuming these are old, the block of 6 sits on a decent parcel of land to develop to a higher density (i.e. more than just 6)?
     
  6. Property person

    Property person Well-Known Member

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    Being a majority owner doesn't mean anything
     
  7. Car tart

    Car tart Well-Known Member

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    Having a few units in different buildings spreads the risk. The only advantage of owning in the same building is if its a cheap way of amalgamating a large site, but in your case that doesn’t work out.
     
  8. Beano

    Beano Well-Known Member

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    What would be the net yield of the units that are for sale ?
     
  9. TMNT

    TMNT Well-Known Member

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    Wouldn't the only benefit of majority share be bragging rights and control at agms and body Corp decisions?
     
  10. Jamesaurus

    Jamesaurus Well-Known Member

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    I'm one for the lack of diversification camp. I feel this would outweigh potential of buying the whole block down the track and then potentially re-zone or sell the site as a whole.
     
  11. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Or more conflict.
     
  12. Brody Hales

    Brody Hales Active Member

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    Hi Jez - interesting article, and while I am an experience property investor, I am yet to purchase a 'block of units' - how does one go about getting into this space as opposed to individual property investing in houses?