Risks and Benefits of Buying a 1960s Unit?

Hi all,

I've been reading a few threads around buying a unit that's from the 1960s (this one is smack bam on 1960).

I know the few things I should look for are cracks and if anything has been painted over. Is there anything else I should be looking for esp in an older block of units?

Additionally, what are the risks and benefits of buying an older unit? I read a few posts saying that units in the 1960s with cracks could be demolished and rebuilt. Does that mean it's a bad thing to buy if you're intending to stay or good if you're looking to buy and remake the money in the hope it gets demolished? I'm assuming this is potentially bad since you're paying for more maintenance costs.

I'm very new to all of this so any advice would very helpful

Thanks

 

Just get it inspected by a (building and pest) inspector. If that raises any flags then get any follow up inspections required.

Buying into a strata complex has particular things to look out for. Read the information at this link carefully. It’s from the NSW Dept of Fair Trading:
Buying into a strata scheme

Particularly the section titled ‘Before signing a contract’ (which advises getting qualified legal advice and specialised checks).

 

I'd be much more worried about a modern apartment with cracks, rather than a 1960s unit with cracks.

 

Yeah definitely will! Just wanted to see some high level thoughts

 

Haha that's fair - yeah I think the biggest thing I learned from scouting the forums for a few months now is to avoid a completely new build

 

Yep. It’s still standing. That’s a plus.

I had a 70’s unit. Had cracks that could almost fit your fingers in. Held it for 10 years and more than doubled in price.

But I have noticed that since selling it 5 years ago the price has remained flat. In fact I’ve noticed most units S and SW of Sydney haven’t gone up much at all in recent times. But of course that may change.

 

Let me guess you like Viet food so ya invested in Cabra ...Canley Vale...Liverpool...am I warm?

 

Yes. You’re right. It was Cabra unit. Still holding Liverpool unit. But. It’s flat unlike Mt Druitt houses which have boomed oh yeah baby...I’ll be in Bondi before you know it!

 

Check that the strata is appropriately funded, and that there is cooperation at the body corporate. But generally, these are well built and uncomplicated structures.

The benefits of this sort of investment is usually:

1) The older apartments are placed in the better parts of the suburbs becuase they built in the best parts first.

2) They are fully depreciated generally, so it limits your down side. From an investment perspective, you are buying future cash flows plus some apportionment of land content. Very simple.

3) Opportunity to develop/add value.

4) You aren't buying at a premium (you are buying at a price set by the market, rather than a margin set by the developer).

 

There was a chart I saw somewhere, (maybe here?) showing how flats tend to go through cycles of 9-10% pa capital growth and 1-2% pa capital growth. The last big growth period finished in Melbourne/Sydney at about 2012 so we're due for another period of sustained higher growth.

These points are linked. If you buy an older flat that is newly renovated you're paying more for less upside in the near future. Obviously if held for 10+ years there would be opportunity to add value, but you've basically paid for someone else to renovate the property to their liking and maybe not to yours.

 

Yep...I see you selling up am moving to North Bondi......with all the in crowd. Just make sure you give me notice so I can film the looks when ya pull up in the limited edition Torana. ....which pounces would never know would be worth more than their Mercs and BMWs.

By the way did you buy any houses in Cabra.....houses there would make prices rises in the Eastern suburbs look like minnows.

 

That's pretty interesting - did it affect anything on a strata level?

 

But there has been massive unit development in Sydney. So that might throw the cycle out.

However there are great differences in the prices of units and houses.

For example, in St Marys NSW the cheapest unit is around 300K while the cheapest house is 850K. IMO units are underpriced by about 200K out there.

Same thing happening in other suburbs. Units have to catch up to close that gap. When, I don’t know.

 

Thanks for the detailed response! What do you mean by cooperation at the body corporate?

Dumb question but for redevelopment of a unit, if one person says no in the block, does that mean it can't be redeveloped?

 

Bondi here I come! Look out Sackie, Look out for the noisey Commodore on Campbell Pde.

No I didn’t buy a house in cabra. Anything decent is big money. I just now saw a decent townhouse near the shops and they’re asking 850K. Can you believe it?

 

You mean the strata levy? No because nobody cared about the cracks. The few people who attended AGMs only had one thing on their mind...to reduce the quarterly levies as much as possible.

 

Cooperation at the body corporate - means, does the body corporate committee get along? Can they make decisions? In a typical strata report, it is called discord.

For a redevelopment, the rules changed in 2016 to stop 1 owner stopping a development. All you need is 75% to agree.

 

Ah ok gotcha, awesome thanks for the advice.

Didn't actually know about that - Learning new things everyday.

 

The benefit is they are usually on a disproportionality large parcel of land, so more sqm/strata title.

The con will be the sinking fund v repairs that need to be undertaken and some of these older paces will have concrete cancer, for example and that's pricey to rectify.

Be sure to ask for the last 2 years' financials and minutes of the AGM, good luck getting an agent to forward to you in the hot market though.

 

Mm yeah that's fair! Quick question - is the sinking fund the same as the capital fund?