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Sinking Fund

Discussion in 'General Property Chat' started by markson, 22nd Apr, 2016.

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  1. markson

    markson Well-Known Member

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    Hi Everyone,

    Do all strata properties in QLD have to have a sinking fund? I notice some on some units/townhouses the quarterly payments are pretty high. Some as much as $500 per quarter. This would really eat into your holding costs after paying for strata fee's as well.
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    They're compulsory in Queensland unlike some other states.

    Even without this, they're generally higher in Queensland than other states. Especially complexes with elevators, gyms, pools, etc
     
  3. Azazel

    Azazel Well-Known Member

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    There are plenty around that are higher than that in Brisbane.
     
  4. markson

    markson Well-Known Member

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    Wow that seems crazy. By the time you pay strata around $400pq and $500pq. You are looking at around $3.5k!
     
  5. Azazel

    Azazel Well-Known Member

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    Sure is.
    Definitely not recommended.
     
  6. HUGH72

    HUGH72 Well-Known Member

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    That's not actually that high, it depends on facilities and location as others have mentioned.
     
  7. Plutus

    Plutus Well-Known Member

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    $3.5k is nothing, plenty of buildings in Brisbane CBD are $6k+ in yearly fees (would have to dig in to work out the breakdown though.)

    Edit: just dug up the details on the one I bought last year:
    Admin fund: $4,190
    Sinking Fund: $1,800
    Insurance: 386
    = $6.3kpa

    Often you will note gross yields are higher though. E.g. I'm looking at a place tomorrow that's about 3km out that I think should sell with roughly a 6.8% gross yield.
    Subtract strata + sink and its already down to 5.3%
    Subtract council rates and we're down to 4.7% yield
    Subtract management fees and we're down to 4.3% yield.
    Subtract landlord's insurance and w'ere down to 4.23% yield.
    Tack a few more expenses on like smoke alarm inspections (QLD....) & there is a fairly striking difference between gross & net, which is why real estate agents up here always market apartments with the expected (inflated) gross yield.
     
    Last edited: 22nd Apr, 2016
  8. Azazel

    Azazel Well-Known Member

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    Cheese n rice!
    Did you know that before you bought it?
     
  9. D.T.

    D.T. Adelaide Property Manager Business Member

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    Stick to buying houses ;)
     
    Melbpositivegeared likes this.
  10. sash

    sash Well-Known Member

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    Most do but are included in the $500 as they quote one figure.

    $500 is the norm in Qld (neither high nor low)

    A couple tips to find lower cost strata blocks:

    1. Typically in low maintenance blocks with no facilities usually 30-40 years old. PQ strata is usually 350-450pq
    2. Typically 6-8 unit blocks
    3. For next capital growth 3-10 klms to the city a stretch even 13 klms will do
    4. Stay away from high rises
    5. Look for units in streets surrounded by houses with $1m plus price tags. Usually in BCC

    Rates should be 1100 pa
    Water should be 1000 pa
    LL insurance 300pa
    Strata 1400-1800

    So total should be 3800 to 4200.

    Remember the maintenance should be much less as it is concrete shell as opposed to a house.
     
    magma likes this.
  11. kierank

    kierank Well-Known Member

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    When buying properties with Body Corporates, I either join the Committee (preferably as Chairperson or Treasurer) so I can influence where the money is spent or buy the whole complex and control where the money is spent.

    We own a whole block of units and we set the Sinking Fund to $25 per quarter.
     
    Ted Varrick likes this.
  12. ashish1137

    ashish1137 Well-Known Member

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    Willing to sell any of those. I am sure the buyers will be plenty. :D:p
     
  13. kierank

    kierank Well-Known Member

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    Nope
     
  14. Jerry O

    Jerry O Well-Known Member Premium Member

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    strata titled properties in QLD tends to be higher. and I agree with sash.. the bigger the complex, the higher the rates.
     
  15. Scott No Mates

    Scott No Mates Well-Known Member

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    What happens to planned and reactive maintenance? Or do you have 'enough' on offset or elsewhere to cover these vosts?
     
  16. Plutus

    Plutus Well-Known Member

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    Yeah I did & It doesn't really bother me. Its:

    • Neutral/tiny bit positive with 20% down
    • should be able to bump the rent 4-8% within 12 months
    • 20%+ bigger than new stock
    • 15-20% cheaper than new stock
    • in a really good, smaller building (only 40 units right in the CBD)
    While it sucks to see it going from nicely positive to neutral/tiny bit positive, it also feels good knowing that there is a roughly $300k pot sitting around & that the maintenance standard is really high. If I was the previous owner I would be pretty pissed that I've paid roughly $7,500 in advance for future work I wont benefit from, but as the new owner that's a bonus for me + its a long term buy & hold for me.
     
  17. Scott No Mates

    Scott No Mates Well-Known Member

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    If they sold whilst the works werein progress they'd achieve a lower price so it's better to sell with $ in the Sinking Fund.
     
  18. kierank

    kierank Well-Known Member

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    You guessed it - we have funds in Offsets to cover any/all maintenance items.
     
  19. Plutus

    Plutus Well-Known Member

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    Makes sense to me if you've got 100% ownership. No point tying up the $$ in low interest accounts waiting for what ~could~ happen when you know you can use it better elsewhere & still have it available if necessary. In multi owner strata scenarios I still think its better to have it available if needed than to try to convince X many residents they need to find the cash to pay a special levy.
     
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  20. Azazel

    Azazel Well-Known Member

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    Oh boy, if there is an issue the owners are going to be screwed.
    Should've set it at $0 for the lols.