Buying a Block of Units

This is where choosing the right banks and right structure helps! Depending on the banks some will limit the LVR and some may not even finance this under residential rate. Having said that there's a bunch of lenders that would go up to 90-95% for block of 4 or less and 80% LVR for a block of up to 10.

However if you have equity in another property you could potentially get an 105% loan ( Stamp duty etc..)

If it's strata titled; then the stamp duty will be aggregated ( if settled on the same day) and will be more expensive; if it's under one title then stamp duty is ok

Other cost;

– Land tax

– Council rate ( normally cheaper! )

– Water usage ( unless it has separate metered….very rare for older style units)

– Bank valuation ~ $300 per unit.

– Insurance is expensive 

– Cheaper council rate

– No strata

– CG and RY

– Control

– Can strata title later and sell off

list goes on!

Just settled on one last month and yes i applied for an 105% loan

Cheers

Michael

Hi all,

Sorry if I ask a question on slightly different topic on block of units, just wondering why some of the sales requires buyers to pay GST? I happen to see an ad for 1 block of 4 units for sale here in Brisbane with tenants already in it. Had done some checks that the block was built in 1992.  Could it be the current owner strata titled them and onselling them??

Thanks in advance for the answers.

Hi Chardie

I have strata titled 43 blocks here in Brisbane over the last 16 years and still own 3 large blocks in my portfolio.

Regretfully the days of 4 units and under being treated as a residential loan is almost a thing of the past with only 3 lenders adopting this strategy.

In saying this if there are some good comparative sales then we can still do upto 10 units on 1 title as a residential loan.

I am currently financing a block of 8 units here in Brisbane for a forum member and we have done this at residential rates of interest albeit they only needed 65% lvr.

GST is only payable when you undertake "Substantial renovation" so if in doubt probably a good idea to obtain a PBR.

We have used this on a couple of the blocks in the past where were unsure.

Cheers

Yours in Finance

Depending on the area the units are located in, council rates and water rates may be charged "as though they are strata titled" even if they are not.  

You'll probably have to hire a gardener to mow the grass on the nature-strip and also any grass within the common-parts, trim plants etc.  It is unlikely any one tenant will feel like doing this for you on a reliably regular basis (and probably none of them own a mower anyway).  Another thing to remember is that tenants may see the common-parts as a convenient dumping ground for any rubbish that doesn't fit in their council bin.  This can mean you might have the occasional trip to the tip.

With regards to insurance, it is important to let the insurer know whether all the units are under the one roof-line or not.  It gets more expensive if they are not.

As has been mentioned, there are some hurdles with the lending so be sure to have a subject to finance clause if you decide to proceed to a contract of sale.

Be wary of investing in any dwelling that earns less than $150 per week in rent.  Whether you have a one bedroom unit or a 5 bedroom house, you still have to maintain an  oven, a hot water service, plumbing, taps, etc etc.  It would really bite if you had to replace an oven in a dwelling that earned only a tiny amount of rent, because it would be many weeks worth of rent eaten up just paying for the oven.