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Pros and Cons of an inner city unit

Discussion in 'General Property Chat' started by markson, 30th Apr, 2016.

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  1. markson

    markson Well-Known Member

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    Hi Guys and Girls,

    So I have been doing a ton of DD on houses around the 20km radius of Brisbane (affordability).

    But what are some pros and cons of buying an inner city unit in a small complex? Less than 10 units?

    Something like this? 4/33 Sarah Street Annerley Qld 4103 - Unit for Sale #122507214 - realestate.com.au
    - Rental valuation $350 per/week ($18,200 per/year)
    - LOW Body Corporate $2,850 approx. per/year (unknown if this includes sinking fund)
    - Rates $270 approx. per/quarter
    - Water $240 approx. per/quarter

    Is there anything in particular that I should be looking for with my DD?

    Just wondering what sort of advantages it has over similiar priced house/land.

    Thanks for your time.
     
  2. dabbler

    dabbler Well-Known Member

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    Here are some thoughts if I were to be buying a unit up there.

    Would want it to be 3-700m from station
    Would want all BC fees under 500/qtr with money in the bank
    Would have to be in the 10k or under otherwise would spend less near bay

    Look at what the similar places are renting for
    No advantage over house and land apart from sharing maintenance costs, which can be good or bad.

    Ask someone who just does PM, ask them where to buy a unit & where it will stay rented, I think transport/shops very close would be main thing.
     
  3. sash

    sash Well-Known Member

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    Good work Gungadin.....not a bad buy...

    If you can get it for say 310k.

    Here are the numbers
    Interest (4.3%) 13,500
    Council/Water 2100
    Strata 1400
    LL insurance 300
    Rental Management 1400

    So neg geared by about $10pw!
     
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  4. Whitecat

    Whitecat Well-Known Member

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    When I was looking at units a big consideration was light because you don't have as many places to move around like in a house where you can always catch a sunny bit . Even in Brisbane which is fairly warm a dark unit is pretty horrible and summer you also have to avoid the western sun because units can become hot like an oven remember you don't have any trees usually the other thing to consider is what's around. Will you be built out for your views even if you don't have nice views it can be annoying if units go up next to you and you look straight into their window or something.
    To be honest I actually think it's harder buying a unit than a house it can be quite hard to find a good unit one that is nice and livable. I think you have to think about environment and amenity it's not all about the modernity of the inside that can always be changed. What's important is that people like to have a nice private balcony and privacy can be very hard to find in units. Other units are often looking at you from either your complex or other complexes. The units that would do well in the future are ones that are private and have a feeling of space eg you can look out into the distance a little bit and if you've got trees around that's a real bonus those are going to be the ones that are going to stand out against the tall Towers with the small dark units
     
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  5. Aether

    Aether Active Member

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    For me some of the pro's and cons of buying that particular unit are as follows:

    Pro's:
    • Cheaper price enables you to buy closer to the CBD compared to a house;
    • Generally lower maintenance costs;
    • Should be easier to rent given proximity to the CBD;
    • Generally higher yield helps your cashflow.
    Con's
    • Oversupply of units may dampen short-medium term capital growth prospects;
    • May not be so easy to rent out - Search of Realestate.com shows multiple 2 bedroom units available for as low as $310 p.w in areas much closer to the CBD;
    • Only two bedrooms - cuts out most families as being a prospective tenant;
    • Body Corporate of $2,850 per year is not really that cheap is it?
    • Fair walk from the station;
    • Low land content limits long-term capital growth compared to houses IMO.
    I note the property was bought for $245,000 back in 2006. Assuming it sells for the listed price of $329,000, that would be a gain of $84,000 (~ 34%) over 10 years which is not that great. Who knows if the capital gains over the next 10 years improves, however, I suspect it may be similar?

    In my opinion, in order to maximise your chances of strong capital growth, you need a house or at least a townhouse, particularly in a city like Brisbane where house prices are so much more affordable compared to Sydney & Melbourne.

    Would love to hear the views of others, especially any opposing views.
     
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  6. larrylarry

    larrylarry Well-Known Member

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  7. markson

    markson Well-Known Member

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    Thanks everyone,

    Yeah the body corp does seem a bit high at $2,850 per year and 2km (25min) walk to the nearest railway station :confused:

    If spending the same money on a house & land then you are looking at being around 25km out of the CBD.
     
  8. markson

    markson Well-Known Member

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    If it sells for $339k then holding costs are more like -$148 per week :eek::eek: assuming you are borrowing the lot (equity release for deposit and loan)

    Kind of a worse case scenario with 4 weeks vacancy and $2k maintenance.

    Untitled.jpg
     
  9. Whitecat

    Whitecat Well-Known Member

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    You can buy a 2 bedroom unit in Woolloongabba for that price may not have such nice views and maybe a little bit older in terms of the kitchen bathroom but a heck of a lot closer
     
  10. markson

    markson Well-Known Member

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    That would be nice, however a search of realestate.com.au shows zero 2 bedroom units even close to the $339k mark at the moment :(
     
  11. Whitecat

    Whitecat Well-Known Member

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    There was a couple about 4 months ago. Actually it was kangaroo point.
     
  12. RM1827

    RM1827 Well-Known Member

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    I went to that auction! I was just passing by and got attracted to the number of people witnessing it. The auction itself was quite interesting, the guy who won was going to go on forever and every increases was in 5k portions! :eek:
     
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  13. Gockie

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

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    Still a sh#tload of money for a unit imo. Great suburb though.
     
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  14. RM1827

    RM1827 Well-Known Member

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    Yes... It was madness really.. No one can stand in the way of a dad buying a house for his little boy :p
     
  15. meme plecko

    meme plecko Well-Known Member

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    @sash my man, how did you manage to negotiate strata down from $2850 to $1400 on this unit? :)
     
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  16. Plutus

    Plutus Well-Known Member

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    • Annerley isn't "inner city" at all. If you go a bit more north there is a tonne of new stuff going up in Woolloongabba which is closer & will be closet to the metro rail if / when its completed:
      Brisbane Development Map | BrisbaneDevelopment.com
    • If $2.8k is the body corporate with sink fund, that is genuinely low for Bris. Suspiciously low
    In my opinion as someone who lives an invests around this area.. Its not a great buy. you would get $20-30pw more and can pick up similar priced units on the gabba/kangaroo point fringe. I've inspected a few buildings of this age around the area and they are too worn out for my taste & very little if any depreciation left.. I think you would be crazy to buy such a rough diamond when literally hundreds of new apartments are about to pour onto the market.. Also yeah its a 2 br but its renting at a 1br value.
     
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  17. sash

    sash Well-Known Member

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    Yes my bad...I just realised my error....$2850 instead of $1400.

    The ones I have are $364pq and $375. They are out there....but in some locations they are higher.

    The ones I have are in Moorooka and Annerley.
     
  18. euro73

    euro73 Well-Known Member Business Member

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    Yes, great suburb. If you ARE going to purchase a Unit in Brisbane, this is the way to do it. Smaller block of Units, away from the horror show about to arrive at the valley, Bowen Hills and West End.

    Areas like this, Alderley, Windsor, Taringa, Cannon Hill , Mt Gravatt , Sherwood etc...
     
  19. markson

    markson Well-Known Member

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    This podcast Episode 58 | Will apartments value drop by 50%? - The Property Couch makes a good point that I should be looking at the land value to land content ratio.

    It makes reference to $400k house and land on the fringe VS $400k flat closer to the CBD.

    Land to Asset Ratio

    A high percentage of the $400k H&L goes towards the building and a small percentage goes towards the land. Where as in close a very small percentage is going to the flat and a large percentage is going to the land value.

    I seem to learn something everyday :p
     
  20. dabbler

    dabbler Well-Known Member

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    Gee I thought you would have bee more than his match ? :)
     
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