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Strata Fees on IP

Discussion in 'Property Management' started by RiMo, 10th Jul, 2015.

  1. RiMo

    RiMo Well-Known Member

    Joined:
    10th Jul, 2015
    Posts:
    83
    Location:
    Sydney
    Hi folks!

    Been a long time follower in Somersoft. Finally decided to join PropertyChat to share some thoughts and ideas with you all.

    A bit about myself: we have 1 PPOR and 2 IPs. The first IP was our first home. We then moved into a new house and rented the old house out. The second IP is a waterfront apartment in Sydney Inner West that we bought 5 years ago. We are on our way to a third IP when we move out from this house into a new one we're building in Sydney's North West.

    Our approach to property investing is quite conservative:
    1. Our IPs are long term investment for us. They are a source of income for now and for our retirement.
    2. We play for keeps. We plan to hold our IPs as long as possible aiming not only for healthy capital growth, but possibly passing them on to our kids.
    3. We like good areas with excellent access to public transport & great amenities nearby, and also those earmarked for future infrastructure projects.
    4. Both IPs are within 1 hour drive to where we live.
    5. Both IPs are positively geared.

    We are pretty happy with the way things are going, however at $1000 per quarter, the strata fees for the apartment is almost 15% of the rental income from it. What do you guys think about high strata fees for IPs? Are they justifiable in the long run? We bought it for $470K in 2010 and it's now worth around $820K in the current market.

    Would appreciate your thoughts on this. Thank you!
     
  2. EN710

    EN710 Well-Known Member

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    18th Jun, 2015
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    2,104
    Location:
    NSW
    Well, sounds like it's working for you no?
    $20000 in the last 5 year in exchange of 350K plus growth.

    Can work depending on your financial goal. I personally not a fan of unit as I'm living in one.
     
  3. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Location:
    Sydney & Adelaide
    Positively geared, good CG, carry on. If you were to sell it, would take 3 years to recover the strata costs at $12k agency fee, let alone CGT cost.
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    20% outgoings is what I budget generally (strata, council, insurance, maintenance etc).
     
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  5. RiMo

    RiMo Well-Known Member

    Joined:
    10th Jul, 2015
    Posts:
    83
    Location:
    Sydney
    Thanks for the input, guys.

    Yeah.. we're gonna hold on to it for now. With council rates, water, insurance & maintenance, it's more like 25% outgoings. But the area is very popular with professionals, young families, and even downsizers. It's a small boutique suburb and as the saying goes: they don't make land anymore, so hopefully it will have good capital growth in the foreseeable future.
     
  6. Reno Crazy

    Reno Crazy Well-Known Member

    Joined:
    3rd Jul, 2015
    Posts:
    55
    Location:
    Vic
    I have few units, I like them but they are in the older style small blocks not like the huge 100 plus unit blocks they build these days.
    Aside from the fact you have made a really impressive CG in 5 yrs.
    I suppose you have to ask yourself what you are getting for your $4K a year? Is it value for money.
    I'm a committee member on all but one of my body corporates, and I have gone to the extreme to knocking on apartment doors to form committees so we can be in control and make the decisions in regards in the use of the BC funds. We are paying off the replacement of a roof on one apartment block so that is $2K per yr per unit.
    I don't like paying for gyms/pools/lifts/electric gates, but thats just me so I don't buy in those apartment blocks.
    I would suggest you look at the last AGM and see where the money is being spent. Also ring the Strata manager and ask is that the going rate in the area, I haven't invested in Sydney units so I cant say whether it is expensive or not. But I know if I was questioning the cost I would want to find out where my money was being spent and have a say. Good luck, although I would love to have that kind of CG on mine so maybe you don't need it. :D
     
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  7. C-mac

    C-mac Well-Known Member

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    26th Jun, 2015
    Posts:
    794
    Location:
    Sydney
    I sgree, hold on to it. Is the strata going tgrough a patch of mandatory maintainence? This tenfs to happen in most schemes every five or so years.
     
  8. RiMo

    RiMo Well-Known Member

    Joined:
    10th Jul, 2015
    Posts:
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    Location:
    Sydney
    The strata's been quite good so far. The building is fairly new, built in 2009 I believe. Recently when we had those 3 days of non-stop rain and storms in Sydney, level 8 copped a bit of water damage but because the building is still within warranty, the insurance fixed it all up. We haven't been asked to make any extra payments for maintenance or other repair jobs.

    You guys are right. Just like everyone else, we need to decide whether any cost associated with having/maintaining this unit is worth it in the long term (ie. costs vs CG & rental income). It's just that whenever we do our tax at the EOFY, those $4K stands out a bit! But again, this unit has access to its own country club, gym, swimming pool, tennis courts, and even a golf course. Someone has to pay for all that! ;)

    Thanks again for all your responses. I really appreciate it. :)
     
    Last edited: 12th Jul, 2015