I've been researching apartments in inner melbourne as potential IPs. I came across a couple in a newish development (2005). One is a 3/2/2 currently leased at $560/wk with BC fees of $1450/qtr and the other is a 2/2/2 currently leased at $480/wk with BC fees of $1000/qtr. The BC fees are 22% and 17% respectively of the rent for each apartment. That strikes me as extremely high. Is that typical for newish city apartments? If it is, it makes it very difficult to earn a reasonable return.
Probably not too out of the ordinary – there may have been a sweetheart deal with a strata manager who was appointed or there may be legit reasons like high expenditure on insurances, concierge, lift, pool, air conditioned lobbies or major maintenance items which have cropped up. Then again, some good Sydney buildings have levies exceeding $5k/qtr (but you are talking prime locations with everything laid on).
Thanks,
To my mind the very high BC fees make these types of units a no-go for investment. By my calculations the rental return on the 3/2/2 is 3.6% after deducting BC and management fees. That seems pretty poor.Obviously you would expect higher capital growth in the city, but I'm not sure how well these types of high rise (10 storey) apartment buildings compare to the overall unit market. I have 10 year average growth figures for units in each suburb, but that is for all units.
Can anyone comment on the captial growth of apartments in high rise buildings versus smaller scale apartment developments?
Those BC fees seems prohibitively high, but it depends where you're looking..is there an elevator(s)? If it's city it's a good chance, but they still seem very very high.
There are lifts, a pool, gym, onsite manager, CCTV security. If you live in the apartments it is probably good value. The question is whether it makes a good IP given that the rent doesn't seem to reflect the high BC fees.
jack620 wrote:There are lifts, a pool, gym, onsite manager, CCTV security.Yep, that's the reason – all of these facilities cause the BC fees to be quite expensive. At least you've identified this now instead of later on down the track…..some investors don't take BC fees into consideration and jump straight into the purchase….imagine getting that first $1k BC bill for the quarter
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
The newer stock will get you better rental return than the older, but the older stock 60's-80's will have lower body corps. Renovated 60-80's will attrack better quality tenants at better rents, and not have the gym and pool that no one uses anyhow. check out http://www.maxrent.com.au for online rental apprasials in Melbourne to ensure that it will lease for what the agent is telling you…..
Thanks Laura. I'm sure you are correct, but it's complicated by the fact that newer properties generate a decent building depreciation tax deduction, which can exceed the BC fees.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
