NSW OTP Studio St Leonards - Advice

Hi everyone,

Looking for some advice for future courses of action.

2 years ago my parents helped me put down a deposit for a property. They chose the property... and it is an OTP Studio in St Leonards for 650k. They chose the studio at that price point because it would be eligible for FHG. I realise it isn't the best investment choice, but what's done is done. I'm still grateful for their help even if it isn't what I would have chosen.

The unit is due for completion mid to late next year. I'm looking for some advice on whether:

a) I should get rid of it as soon as its completed and cut my losses
b) hold it for 5-10 years in hopes of capital gains

I'm about to turn 25.

 

Can you get out of the contract?

And have you looked into what the market value of something like that is?

 

No, I don't believe so for a 'change of mind'.

How do I get an accurate market value if it hasn't been built? I've seen similar apartments, but not as new, have sold for ~610k.

e.g.
Sold 401/2 Atchison Street , St Leonards NSW 2065 on 28 Sep 2017 - 2013837239 | Domain

Other times for less
Sold 705/38 Atchison Street, St Leonards NSW 2065 on 14 Mar 2016 - 2012636863 | Domain

 

There are a lot of apartments going up at St Leonard's but that is for good reason as the fundamentals are good - great transport (train and metro), next to the hospital and will only be five minutes to the city on the metro.

I would take a wait and see approach. The unit may well be positively geared on completion.

The actual question is what would you better do with he money?

 

Can you settle? What if the valuation comes in low? Can you still settle?

 

I would use the money to invest in another property that has better capacity for capital growth I guess.

Yes, I can settle if the valuation comes in low. The question is whether I should continue to service it for a long period of time in hopes of growth or whether to get rid of it earlier... or any other suggestions would be appreciated.

 

@Chaumander I live and work in this area. The answer will be a bit clearer on completion when people start moving in and you know what asking rents will look like.

You'll notice that there are quite a few apartment projects going on nearby. St Leonards is going through a bit of a transformation, with approved projects in the area adding up to billions of dollars. As @bunkai notes, it's extremely convenient as a transport hub, however (depending on your LVR) I'd be surprised if your unit will be positively geared on completion.

To consider a long term hold, one thing you'll need to weigh up if your unit has an appealing 'point of difference'. Another consideration will be holding costs like strata levies, as they can really eat into your cashflow and possibly your lifestyle.

 

my 2 cents.

you already bought into a property, and feels that its not gonna "perform" the way you expect.

your decision is to sell and use the money to buy another property ?unless its in a different country or state i dont think it make financial sense considering you will be taking a lost and paying stamp duty on your next property. you need to consider how much growth you will need on your next property for you to justify your upfront cost outlay.


if you think there is a different investment that you can better the use of your money.. then by all means go ahead.. until that like other have said, i would go long and do nothing..

 

Generally speaking, my experience of CG (capital gains) on OTP for the first 5-10 years is that as an owner, you will not see any, as they've gone to fund the developer's bottom line profit.

Having said that, now that you are about to own it, as @KinG3o0o said, "I would go long and do nothing". You cannot guarantee your next choice, due to your inexperience, would do any better.

 

Thanks everyone for your replies, thinking about how much growth I would need on the 2nd property to warrant selling the 1st is a good way to think about it. I would've chosen to invest in another state, such as Brisbane, if I initially had choice over the matter.

However, maybe I am better off saving another deposit from scratch for that, and if any CG comes out of the OTP it will be a bonus.... and as most of you have said, I can only wait until completion and re-evaluate.

 

You sure you understand what it means if the val comes in low?

 

Yes, I'm fortunate enough to have parents to bridge the gap/be guarantors etc - especially as this property was their idea.

 

I am not sure if you are making that much of a lost though. some of them that is around 610K could be a little old, like 5-10 years. Which you one may not be that far off from 650K. St leonards is a good area, for stable rental, it is not a bad choice at all.

 

I will have to, to meet FHOG criteria. I imagine it will eventually be a bit cramped for 2 people (and hopefully a dog in the future). The potential rent is also higher than what I am paying now! So I will likely move out after the 6 mth period.