OTP apartment for PPOR, am I crazy?

The only time I would buy OTP is if I was flipping, going in early in a boom cycle and pulling the pin prior to completion, still some risk and getting the timing right is critical, get it wrong and you are up the river with no paddle, especially if the values don't come in on completion....ouch and double ouch

Not one of my fav strategies, but I do know some investors who made a killing doing this one.

 

For that coin, even in Sydney you could find a duplex or a townhouse. Honestly, get something with a little land. Doesn't have to be huge but it makes a difference to your well-being and if circumstances change you should find it easier to rent out.

The macro problem with apartments (And if you're thinking long term PPOR, you'll need to be thinking macro) is that they can be replicated so easily. You can blink and before you know it, your whole suburb is apartments. They'll all be newer than yours and will require less maintenance making yours worth less.

Conversely every time the density increases (an inevitability in Sydney) anyone living in a house or townhouse benefits.

 

Actually, PPOR is one of the few good reasons to buy OTP if it's not a rising market.

This is an investment forum so OTP is frowned upon as an investment, PPOR is a whole different beast. Take your investment cap off

 

I was actually referring to the other type of sunset.
The developers' best friend type.

 

LOL....oh dear

 

I don;t think it's a crazy idea. My sister bought a flat in Ersko about 2yr post OTP; it has gone up a lot. Anyone who buys OTP around rushcutters, ever, also does very well. I have done 2 OTP purchases in Sydney in recent past - Surry Hills (paid deposit 2011/settled 2014) and Cremorne (paid dep 2016 /settled 2017). Both bank valuations came in well over what we paid for it.

Even taking out CGT we could have sold for great profit, making well over 200k per place. Sydney is a different story to the rest of Australia - chronically undersupplied and a lot of very very rich and discerning buyers demanding top/new finishes.

I just think it'd be best for you to "move in" for a few weeks, then rent it for a few years (if you're both on higher incomes than 70k) to get the full depreciation schedule benefits.

It's a great idea. I also love the experience; you get treated like a valued client, taken on cocktail evenings/champagne and sushi, a lot of hand holding. I would NOT buy OTP anywhere in Australia except inner Sydney. Erskinville qualifies.

 

In new apartment developments all the aircon vents should lead out to the parking garage. I've gone through the DA for the building and there is nothing on the roof, it's not accessible by anyone unless you try climb it from the apartment.

We actually looked at adding that property to our portfolio as it had a lot of potential but after getting a building report and asking our builder it turned out to be a giant money sink. We're also only looking at apartments for our PPOR as we prefer the lifestyle.

Yea I've done a serious amount of due diligence on this and nothing bad has come up yet. I've gone through the DA, developers and builder in detail. I have a high confidence the product will match what was advertised. However the risk is mostly around valuation issues if the market heads south but even then it wouldn't hurt us too much, just suck a bit. If it were built today I would buy it in a heartbeat.

We're actually not interested in land for our PPOR, we already have a few houses in our portfolio. If we didn't buy this OTP apartment we'd look at other apartments in the suburb in a similar price range.

Yea I guess that's where I'm having issues, this is our first PPOR purchase, we only have experience as renters and investors so having major internal conflicts here.

 

I think for apartments, especially if PPOR, tons and tons and tons of research need to be done, not just the apartment project or builder, but also the surroundings. There are too many factors that could screw you up. If you have done them all, and happy and confident, then just go ahead.

 

Interesting. As you can guess, i was just browsing the auction results. Anyway, what issues was found - place is sold anyway, so this is purely for curiousity.

 

For ~1.2 million, I'd prefer a cute art deco apartment in say Potts Point or surrounds. More scarcity and likely to appeal to buyers long-term

 

Here is something I attended the auction for in Erko $1.08m

1/32 Ashmore Street, Erskineville, NSW 2043 - Property Details

It may have less sqm than the off the plan, but i'd prefer it to an OTP as its a small development on a quiet street mainly full of houses.

Also very close to station and has a tiny bit of outdoor space.

 

Nice. Not to mention the handsome alien in tights appearing at the door

 

@jamesk if you are going to live in it, then enjoy it, knock yourself out mate.

 

Whoa, how is that possible to get sold at the auction 30% cheaper than the average ?

 

Looks like it's positioned for a sh#tload of aircraft noise.
How's the serenity?

 

Have you looked at 1-2 year old apartments with similar specs and had a comparions?

if valuations fall short upon settlement, then, it means apples vs apples, you should be able to get it cheaper

edit: do people actually use the BBQ sets and open areas in these complexes much???

it seems like a good idea, but I feelthe novelty would wear off pretty quickly

 

just curious, ive seen you use the term "early in a boom cycle" many times - how on earth do you know if at any point in time you're starting early in a boom cycle? (unless you work in the RBA or head of lending at a bank or in government where you know where certain infrastructure is going) ????

 

I don't, I just make sure when I see volumes changing, in other words housing stock reducing and buying volumes increasing then I know something is happening, the market is moving.

I cant time the market exactly cos I don't have a crystal ball, but I do know boom markets last at least 2 years, so I try to get in as soon as I see it rising. I get leads from PC, investor friends etc etc

I also phone lots of re agents in the area/suburb, and if they are saying the same then I know I am on to something. You will also notice lots of under offers and auction clearances start rising.

If anyone wanted to jump into the Syd boom, they could have easily I think that thread started years ago, its a matter of following a lead and then working out whether it is in fact starting to move. Same as Brissy that thread has been going on for years, once again a lead, up to us to work it out, making the phone calls and checking what is happening on the ground.

I also don't know when a market will peak, I exited the Melb and Syd market a tad early. Could have made more money, but I am not greedy, happy to move on take my profits and find other markets that will make money. I don't want to be stuck at peak with all my eggs in one basket.

I don't know so much about RBA or head of lending at a bank will really know where to invest?? markets moving are not just about interest rates, infrastructure. if you look at Syd and Melb boom in the main it was immigration that started the boom, at least from what I think, from what I can see.

 

James. Go west young man.

I think size matters and for $1m+ you get plenty of room out west.

 

No need to rush IMO. I'm seeing resales of OTP pop up, this is probably from overseas investors and local people who can't get finance. If momentum picks up on these types and stock floods the market there will be some good buys. Benefit is you won't have to wait for them to be completed. Already seeing a few of these on gumtree.

The south Sydney pocket is probably where the bulk on the inner ring apartments are getting built, if I was a gambling man, I'd bet the oversupply would be there, Erko, Alexandria, mascot, Roseberry etc.

Having said that 1.1m is serious coin. You can get a newish (1-3 year old established apartment for that coin in that area or even closer, Camperdown etc).

Also keep your eye out for terraces in the inner west around that price point and older apartments which are generally larger than new otp builds.