Hi,
I have found out today that the big four banks will not lend if the property foot print is less than 50 square meters. The rationale being there will be gaps in rent due to the types of tenants attracted.
I could proceed with another financial institution, but wonder if this might cause problems when it comes time to sell.
Thoughts?
Sure will cause problems.
If people cannot get finance then it will certainly limit the market and this in turn will limit capital growth. This is why many of the small apartments have high yields
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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We have some strata titled units @ 49 sq m which, financed with ANZ. Whilst not on the title, the 'allocated' car space and court yard helped in our situation.
For me having to go to an alternate lender wouldn't put me off – I like the higher yields and whilst some of ours are rented to people receiving government benefits they do have a regular income and employment is not an issue.
I would not purchase small units (even over 50 sq m) in a block of several hundred as I would have no control over body corporate charges and there's unlikely to be a scarcity factor when the time comes to move it on.
Terryw wrote:Sure will cause problems.If people cannot get finance then it will certainly limit the market and this in turn will limit capital growth. This is why many of the small apartments have high yields
Spot on. It's demand that drives capital growth – if the demand is being hampered by lending policy than it will have an effect on growth.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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Thanks very much.
So in summary two of you have said cap growth will be an issue
One liked the higher yields and said rentability was not an issue.Yield is just over 5%. Not sure that's enough to make up for the lack of growth.
Cheers all,
All sounds good in theory.
In practice my Potts Point unit (TINY) has gone up 50% in 3 years. Had no trouble refinancing it last year at the higher price.
7.9% yield. It's my most favourite purchase. Very low vacancy rates.stu_macca wrote:Hi,I have found out today that the big four banks will not lend if the property foot print is less than 50 square meters. The rationale being there will be gaps in rent due to the types of tenants attracted.
I could proceed with another financial institution, but wonder if this might cause problems when it comes time to sell.
Thoughts?
It all depends on the “deal” and location….if it’s located in a good area ie in the CBD then vaccnay is not going to be a problem. In general smaller units has “less” capital growth ; looking at haymarket Sydney – the area went up by 30% in the last 4 years…but on average smaller units only went up by 20% on average….so growth can be drive up by location and demand of the area overall.
1. location is key for smaller units
2. 5% GROSS yield is low…you should be aiming for a min of 6-6.5% gross when it comes to units.Regards
MichaelMick C | Shape Home Loans
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Yep, I think it all depends in location. I have recently refinanced a smallish 1 bedroom apartment in Petersham with no worries. A family member recently refinanced a 3 bedroom house in Karratha, WA and had to jump through hoops and order a full valuation in order to release funds. Both deals were with the same bank. So I think this shows that it depends where the property is located rather than what the property is that determines whether a bank will lend on it.
Cheers,
LukeHi,
Thanks for the extra comment. The debate continues…
It's in Forest Lodge (adjacent to Glebe).
A few of you have said location is the driver, but also referred to "CBD" which I guess Forest Lodge is not.
stu_macca wrote:Hi,Thanks for the extra comment. The debate continues…
It's in Forest Lodge (adjacent to Glebe).
A few of you have said location is the driver, but also referred to "CBD" which I guess Forest Lodge is not.
Forest lodge is not CBD, but it brings and attracts part of the CBD demographic as it’s only a 3-5min bus ride down…and it’s close to the Uni + hippy funk place of newtown
Forest Lodge – tend to have a lot of OLD units and strata from my past dealing are like $25-30 per squ meter!! which is expensive.
Forest Lodge “was” a great place…but due to “The lodge” in broadway it has affected the prices of student accomdation/ smaller units in that area, the lodge has roughly 25 units on the market all around $110-$200k.If your going to buy in Forest Lodge my personal feel is
1, $4,500 per squ meter max
2. 1 bedroom only- dont even look at the studio ( The lodge are pretty much 70% studios – you want to complete on a different market)
3. No student accommodation
4. Strata no more then $15 per ssqu meter
5. Own laundry, bathroom and kitchen
6. Not on Parra road- stick with side streets
7. The set up of the place ( floor plan) is designed well enough to fit 2-3 ppl comfortablyRegards
MichaelMick C | Shape Home Loans
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luke86 wrote:Yep, I think it all depends in location. I have recently refinanced a smallish 1 bedroom apartment in Petersham with no worries. A family member recently refinanced a 3 bedroom house in Karratha, WA and had to jump through hoops and order a full valuation in order to release funds. Both deals were with the same bank. So I think this shows that it depends where the property is located rather than what the property is that determines whether a bank will lend on it.Cheers,
LukeHi luke! – great buy!
The bank looks at both Property and location.
Karratha from memory is a mining town with a pop less then 7,000; so one of the reason why it may have that problem.Regards
MichaelMick C | Shape Home Loans
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Hi Michael,
Thanks for your detailed response.
The place ticks boxes 2-7.
Just want to check box number 1. It's 48 sqm. You're saying that should sell for $216K?
Note it has a balcony (added to the 48 sqm) and a car space.
Cheers,
48 squ meter’s is a different ball game…it’s pretty much 50- and the bank will not have a problem financing this what so ever!
So expect to pay $390-420…if it has it’s own parking and it’s new then mid- high $400-480Normally prices drops a lot when it’s hard to finance = hard to sell….But on 48; easy peasy.
If it fits 2-7….especially 7; then it sounds like a good buy as long as the price is not over the top.
Regards
MichaelMick C | Shape Home Loans
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Catalyst wrote:All sounds good in theory.
In practice my Potts Point unit (TINY) has gone up 50% in 3 years. Had no trouble refinancing it last year at the higher price.
7.9% yield. It's my most favourite purchase. Very low vacancy rates.Hi Catalyst – just wondering, is yours the Crescent on Bayswater?
No- Vanderbuilt.
The demand in Potts Point/Elizabeth Bay area is screaming (both buyers and renters)..
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