Certainly would want to have a decent deposit these days as these babies are small and financiers just love em !!!!!
Richard Taylor | Australia's leading private lender
Certainly would want to have a decent deposit these days as these babies are small and financiers just love em !!!!!
Richard Taylor | Australia's leading private lender
Thanks Thomas, good food for thought. There isn't any other 'live in' places in that price range around the City is there?
Cheers
if you put in a 35k deposit how many years before you could recycle it? my guess would be around 10yrs meaning imo this is a complete waste of time. better off buying a cheap 2 bedroom unit, 6% yield, small reno, increase the rent leading to a 7-8 percent yield.
To Brisbane 2010, I think Kangaroo Point and South Brisbane are prime locations to look as they will continue to be popular and there are still a few studios around at under 200K but not many. East Brisbane and Kelvin Grove and Bulimba are good locations as well, but there are very few sub 200K units in these locations.
With all due respect to Alani, the studio apartments I own deliver a yield of approximately twice the yield of cheaper two bedroom apartments and nearly three times the yield of the rented houses I own. My two-bedroom units are all fully renovated and in the inner Brisbane suburbs, and they currently rent for between $310 and $330 per week, while my studios, at about half the buy-in price deliver that or more per week.
The simple fact is that studio unit investors generally benefit through a much lower initial outlay, lower costs to maintain the property, and proportionately higher yields. There is no downside for investors who want to borrow up to 100% and have other security to offer, or to investors who choose not to borrow. For investors who want to borrow and to use the studio unit as their only security, they would generally need a deposit of between 5% and 25% of the purchase price (depending on the particular bank, and the investor’s situation and relationship with the bank). Some of the larger banks don’t lend on studios while others always do. All banks generally want fair deposits these days from investors where the investor does not have additional security – this applies regardless of the type of property that is purchased.
I note Alani’s recent comments on another “Property Investing” thread:
“Well my prediction is property will generally go up around the country. Its funny how between 2002-2007 interest rates were on the incline yet property went up in the value. Rates will start to rise again but that won't stop ppl buying property. There's a massive shortage of undersupply and that will remain the same for the next ten yrs. Intake of migration, China and India becoming westernised, I mean, who cares about America anymore. Has China stopped growing during the past year?? The mining industry is set for massive growth. Australia will keep growing, land will become even more expensive…”I certainly agree with these views about increased demand for accommodation and the undersupply of residential property in Australia’s in the next 10 years.
Alani’s idea about buying a high returning but cheap 2 bed unit is not a bad way to go, and I’ve done that a number of times myself. The difficulty of course is finding an affordable 2 bed apartment delivering anything like a net 6% yield.
For example: For a $300k two bed unit to deliver the 6% yield required to almost break even (i.e. to nearly cover the interest component of the bank loan), the property would have to deliver to you $18,000 net, after body corps, rent, insurance, rates and maintenance is taken out. Therefore the gross rent, assuming you managed it yourself, would need to be around $25,000 or possibly more. That equates to at least $480 per week. The majority of cheaper renovated 2 bed apartments that are rented in SE Queensland cannot achieve that rent for the owner and accordingly do not yield anything like 6% or 8% of the buy-in price. Usually the yield is in the order of 2 or 3% if you are lucky – so they certainly do not break even at the outset and usually require ownership for many years before they do. Then if you have to renovate the apartment, I suppose you might need to spend between $10,000 and $25,000 depending on how far you want to go. The rental return would increase after renovation but you would lose your rental income during the period that you are renovating.
Alternatively a small studio unit that costs from $150K to $200k and should deliver a much higher proportionate annual return if it’s well located. A renovation, if you ever need to do one, is generally lower cost also.
As I mentioned in an earlier comment, I’m a great believer in diversity of property assets, and my message to investors starting out is to try to buy and hold a few of each property type in good locations if you can, and over time you will do well I’m sure.
Good wishes to all…………..
Thomas.It's not that Shafston University Mansions isn't a good investment. In fact, it proved to return well over an extended period.
The problem is with managed units in general in Queensland, and the problem could be readily fixed if the Office of Fair Trading did it's job; the Queensland Government cleaned out the apparent corruption; the Office of the Commissioner for Body Corporate and Community Management did its job properly for the benefit of unit owners and not for agents who are ripping off their clients; and the PAMD Act was modified to provide strict regulation against agents interfering in body corporate management for their own financial benefit.
Shafston was a great investment before Brisbane City Student Accommodation (Richard Arbon, Danny Little and John and Kerrie Shaw) took over management. Even under BCSA's management, it has generated fair returns, though apparently less than unit owners felt entitled to expect, and apparently some unit owners suffered significant losses.
The problem with ALL managed units is that when agents breach their obligations, bodies corporate struggle to enforce their rights for the benefit of owners because the OFT don't police agent conduct properly and the OCBCCM system is a dismal failure.
The legislation doesn't stop agents 'vote buying' and influencing voting in the body corporate improperly. It does theoretically stop the use of bullying and threat, but in reality it doesn't because the legislation is so difficult to enforce. If the BC takes an agent on in the courts, the agent uses clients' money to drag out proceedings and avoid accountability while the BC has to increase levies to pay legal costs. Meanwhile, agents are able to buy support from some owners by illegal favouritism, and privacy laws prevent detection of that practice. The favoured owners create disruption in the body corporate, imposing more cost and stress and often obstructing the enforcement of rights, thus disadvantaging the other owners.
Lawyers advise that ultimately the OFT is the only effective recourse owners have against agents who do not honour their legal obligations, but several bodies corporate have complained about the OFT failing to act on complaints against letting agents and managers and releasing reports that contain misrepresentations improperly favouring agents and denying clients fair dealing.
There are records of unsuccessful appeals to the Minister from lot owners who suffered threat of termination of their income if they did not refrain from demanding compliance with law. There are even reports that owners who demanded legal compliance did suffer termination of their income by way of retaliation, but, alarmingly, no action was taken to penalise the agent concerned.
The system is a farce and a disgrace! Legislators and law enforcers in Queensland should hang their heads in shame.
Until the system is fixed, buying ANY managed unit in Queensland is a recipe for disaster. Thankfully, Shafston unit owners can exit the letting pool and either occupy their units or let privately. Right now, I'd say the units are a wonderful investment, as the asset value will undoubtedly soar as soon as the issues with the letting agent are resolved. What you gamble on if you buy, though, is that ultimately right will prevail.
All property investors in Queensland should unite to demand reform for the protection of investors in managed unit complexes. Write to the Minister for Fair Trading, the Office of Fair Trading, the Commissioner for Body Corporate and Community Management, the Premier, and the Attorney General demanding legislative reform and action to enforce the provisions of the PAMD Act strictly and without favour – including imposing heavy penalties for agent breaches and providing strong protections and agent-funded compensation for unit owners.
Advertise your warnings to all investors to avoid investment in any Queensland property with a body corporate attached until there are satisfactory legislative reforms and evidence that policing authorities are doing their job properly.
Investors need to unite to reduce investment risks. Managed units SHOULD be good investments. Developers and sellers of managed units need to feel pain so that they also will call for reform for the protection of their buyers, and so that developers will structure initial letting and management contracts to provide fair protection for unit owners and to ensure letting agents and managers are compelled to earn their returns, and are not able to abuse their power to bully or defraud.
Right now, it appears a letting rights business is a great business to be in, because it allows agents to defraud clients without accountability. There are doubtless many honest, diligent agents – but there are also some very bad agents who will stop at nothing to line their pockets at unit owner expense. These bad agents profiteer for a short period, then offer their business for sale at a hugely inflated price over what they paid for it. If they sell at the inflated price, the replacement agent cannot make a profit by honest dealing other than by imposing massive fee increases. Owners suffer long term loss, or the new agent goes broke, giving the complex a bad reputation.
That's what almost happened at Shafston, but, fortunately, the sale of the business for over $3 million did not proceed, and the very active and competent BC committee was able to force some reforms for owner protection. The result is that units are still providing a reasonable but not optimum return and asset values are holding better than might be expected. If the BC ultimately prevails in its attempts to terminate BCSA, the units values are likely to rise quite quickly. Ongoing returns, of course, depend on the quality of the replacement letting agent, but the BC has learned a valuable lesson about evaluating agents and ensuring contractual terms deliver fair protection to unit owners. All that is needed now is for legislators to take notice of the many examples of failure of the current system, and take the appropriate steps to ensure investors interests are fairly protected against bad agents and managers.
Hi All
I am looking at the Shafston apartments for sale this week. I have cash so won't have a mortgage on it and want to buy one to live in as an owner occupier. Can anyone tell me what it is like to live there and how the management are these days?
Cheers
Hi Nat
Hate to say Thomas seems to left the forum.
Probably gone off to sprook his wares elsewhere.
Funnily enough financed one for a client a month or two back.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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