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Whats the catch? (Cheap melb city apartments)

Discussion in 'General Property Chat' started by Chabs, 19th May, 2016.

  1. Chabs

    Chabs Well-Known Member

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    I was just casually browsing Melbourne property prices and found these two 1 bedders/studios for cheap prices, I am wondering why the value is low and the yield is high, am I missing something important?

    102/339 Swanston St, Melbourne VIC 3000 - Apartment For Sale - 2012777906 (asking $220 000+)

    1225/43 Therry Street, Melbourne VIC 3000 - Apartment For Sale - 2012744845 (asking $195 000)

    They both seem to have room to add value as well. Why would the agents also push the high yield, is turnover/vacancy very high for this type of stock?

    Is investing/buying near a university undesirable?
     
  2. imbi3

    imbi3 Well-Known Member

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    They are small, predominantly for students tenants only, probably high body corps and management fee (if managing via the in-house management company - 339 Swanston St). Net yield will not be as high as the figures advertised

    Therry St is extremely small however some are under NRAS

    You probably could do cosmetics improvement, however impossible to make the units larger :) A lot of SMSF like these though given the higher than usual rental yield
     
  3. datto

    datto Well-Known Member

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    Sound like serviced apartments.

    What isn't the agent telling you eg high strata and management fees with a 20 year locked in contract? No flexibility to to manage yourself or live in the unit? Low capital growth. Bank finance may be harder.

    But then again some investors like them and make money out these types of IPs. I'd be ringing the agent Dingle Partners (lol) for more info and making a decision from there.
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    I'd go so far as 'give Dingles a tingle' & after that convo have a tinkle.

    They're cheap as they are small, hard to finance, high running costs, seasonal income (uni terms only) & the agency name rings a bell.
     
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  5. ashish1137

    ashish1137 Well-Known Member

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    Checknthe last sold price. I recall th ere was a thread where the price in 2011 for inner ciry apartments was the same as they were getting sold.now.

    You are far better off buying something with 4% yield and 5% average growth with land otential totalling to 9% than an apartment offering 8% yield and nil future potenial.

    Regards
     
  6. melbournian

    melbournian Well-Known Member

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    i would stay away from all of these apartments (they're just too small). As someone who used to refurb/renovate apartments in the past, If you want to play the apartment game (u need large apartments) anything 80-100sqm is considered rare nowadays. You need an apartment which can be reconfigured to have additonal bedrooms or bathrooms.
     
  7. Chabs

    Chabs Well-Known Member

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    Thanks for feedback guys, I guess the capital gains is very poor on these, fully agree with their lack of value, unless you're using them strictly for income producing purposes.
     
  8. InvestmentNoob

    InvestmentNoob Member

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    What sqm is considered too small and to be avoided?
     
  9. melbournian

    melbournian Well-Known Member

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    i would follow these as a guide:- (you can renovate old to new but you can't renovate to increase size)

    Old
    1 bed - 56-60sqm
    2 bed - 78-90sqm
    3 bed - 92-110sqm

    Off the plan (avoid)
    1 bed - 39-49sqm
    2 bed - 55-65sqm
    3 bed - 75-89sqm
     
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  10. melbournian

    melbournian Well-Known Member

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    for CG - no, for leasing, AIRBNB yes - depends which you are chasing.
     
  11. MTR

    MTR Well-Known Member Premium Member

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    oversupply
    < 50 sqm harder to source finance.
    Perhaps cash flow?? if stacks up after all costs
     
  12. Chabs

    Chabs Well-Known Member

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    I can see an investor who is single living in one of these and owning a few in the same complex and managing them pretty much part-time. Plenty of opportunities to mix airbnb with seasonal accomodation and short term cashies. In that case they'd be highly profitable.

    I am the type of investor who prefers set+forget stock that has potential to add value.
     
  13. melbournian

    melbournian Well-Known Member

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    i remember seeing an AirBNB post of a girl who had 4 X 1 bedders at $110-$150 per night each. is not bad income for part timers as that would be more than some full time workers salary per year.
     
  14. Chabs

    Chabs Well-Known Member

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    As a young single person this sounds like a very appealing mix of lifestyle and income to me :D:)

    How many people get to live in the city, meet plenty of cool people, live near a university and make plenty of friends whilst making significant profit. Usually its dull jobs that earn big $$ on someone else's terms..
     
  15. InvestmentNoob

    InvestmentNoob Member

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    Wow that is pretty decent but how would you manage that? Would you have to live in the same apartment as Chabs said, or close by at least?

    These apartments seem hard to sell later on when you want to ditch them though.
     
  16. melbournian

    melbournian Well-Known Member

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    Not sure she looks like just straight out of uni, and possibly she rents that and then leases them out again. SHe had 4 from past memory 2 in each building and very true, most likely living in the same building, directly across southern cross train station and the airport express bus. They do sell though CG is next to nothing. i think these kind of airbnb 1 bedders are good for things SMSF when the return is much better than investing in a private fund and paying fees.
     
  17. hammer

    hammer Well-Known Member

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    There's a difference between "cheap"and "value".