Sinking Fund

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.

 

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

 

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

 

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

 

Sure is.
Definitely not recommended.

 

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

 

$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.

 

Cheese n rice!
Did you know that before you bought it?

 

Stick to buying houses

 

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.

 

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.

 

Willing to sell any of those. I am sure the buyers will be plenty.

 

Nope

 

strata titled properties in QLD tends to be higher. and I agree with sash.. the bigger the complex, the higher the rates.

 

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

 

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 ****** 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.

 

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.

 

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

 

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.

 

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