Forums / Getting Technical / Finance / Strata Titling Opportunity

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  • David Thiu
    Participant
    @david-thiu
    Join Date: 2017
    Post Count: 75

    Hi guys,

    I’ve found a Block of 12 Units built of Sturdy Masonry Brick Veneer for $900,000 that are all currently tenanted for $130-140/week (market rent is about $150/week though so there may be opportunity to increase rent).

    I have approached half a dozen different agents in the area, asking them how much I could sell each unit individually if they were to be strata titled, and the estimated price range is $95,000-$120,000. i.e. $1.14-1.44m, and cost of strata titling about $100k, but this is to be confirmed with a Surveyor who I am waiting to hear from.

    This block of units is located in a very good area only walking distance to schools, metro transport, and the Woolworth Retail Precinct, and has recently attacked international attention hosting the acclaimed Agrarian Kitchen gourmet eatery, sustainable farm based cooking school, and much anticipated world class gravity focused Maydena Mountain Bike Park scheduled to open in January 2018.

    Just wondering if anyone would be interested in joining in on this deal, and potential approaching the vendor with TWO different offers:

    1) A Cash Offer of $720,000
    2) An Option Offer to purchase property for $950,000 12 months down the track, but access to the property to strata title, and onsell individual units

    Cheers,

    David

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 11,992

    Hi David

    I am assuming the Units are all in good order and require No updating.

    Yours costs seem very light on as there is no provision for acquisition cost, Body corporate set up, legal and surveying, Finance (I assume you will be looking at around 65% max but will considered Commercial so extra app fees, valuation, legals etc), possible GST and 101 provisions.

    To me even at 120K gross there is no money it.

    I have Strata Titled over 60 blocks in Brisbane and still own 3 blocks outright but from initial numbers think our deal is far too skinny for me.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    David Thiu
    Participant
    @david-thiu
    Join Date: 2017
    Post Count: 75

    Hi Richard,

    The units are in reasonable condition.

    If the Vendor accepts the cash offer $720,000 there is potential for $420,000-$600,000 minus the other costs if sold. If not, then you’d end up holding units yielding +10%.

    If the Vendor accepts Options offer, then there is less deposit costs, less holding costs, and more time to onsell the units, possibly no acquisition costs if all units are presold before option expired.

    The $95,000 is probably at fire sale price, and more likely achievable price being $110,000.

    Can you provide me with more information about the blocks you have strata titled in Brisbane please?

    I’m interested in finding out more about the numbers involved.

    The surveyor has recently replied to my email:

    “Apart from our fees of $3800 + gst there will be a Land Titles Office fee of around $1700 for lodgement. Council will also likely have a small sealing fee/application fee for the strata (maybe allow $1000). I’m not sure where the $20000 figure has come from? The strata titling process is reasonably straightforward. You might have other fees such as building surveyor fees, etc but they aren’t directly related to getting strata titles. Regardless of the condition of the buildings, as long as they comply with the permits at the time of construction then they can be strata titled.”

    Does this sound right to you? Strata titling for only $5,500 or is there something missing here?

    Kind Regards,

    David

    Profile photo of Ethan TimorEthan Timor
    Participant
    @ethantimor
    Join Date: 2016
    Post Count: 282

    Hi David,

    A few questions come to mind:

    Do you reckon it’s realistic that the vendor will accept such a low offer?

    How confident are you that there won’t be an issue with the fire rating of the walls? (aka the biggest killer of strata titling)

    Strata costs can easily inflate if council will come back with certain requests (such as separate water meter for each unit etc etc)

    My experience is in NSW only so not sure how things work in other states but generally speaking strata seems to be a very profitable venture IF it goes through…

    Hope this helps? :-)

    Cheers,
    Ethan

    Ethan Timor | Aligned Finance Pty Ltd
    http://www.alignedfinance.com.au/
    Email Me | Phone Me

    Active Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)

    David Thiu
    Participant
    @david-thiu
    Join Date: 2017
    Post Count: 75

    Hi Ethan,

    Yes, I think $720k is an offer that the Vendor would take into consideration, as he would like to move on and focus on his hospitality business where his returns would be far greater.

    The units are separated by brick veneer, and a local builder is confident that the floor is concrete – however the only way to be 100% is to pay the Surveyor to check out the property.

    Anyways, its no big deal. I’ve moved onto a Duplex: Purchase price $255k. Estimated rent $200/week each side. Will live on one side while I renovate the other side, and could potentially add another $20-30/week.

    So good cashflow now, and potential for further growth later down the track as the suburb is undergoing Gentrification and has been zoned Residential Regeneration Zone. Recently a Developer has been able to build 4 townhouses on a Duplex site similar to mine and sell each townhouse for about $300k.

    I’m thinking maybe 3-5 years down the track I might consider doing the same thing or onselling the site to a Developer. Would you know roughly how much it would cost to build 4 townhouses on a 1200m2 block?

    Cheers,

    David

    Profile photo of Ethan TimorEthan Timor
    Participant
    @ethantimor
    Join Date: 2016
    Post Count: 282

    Hi David,

    Construction costs can vary a lot but a decent general better than nothing calculator is available here: https://www.bmtqs.com.au/construction-cost-calculator

    Would you mind sharing which suburb has such fantastic yields? If you prefer to share via PM, that’s an option too 👍😎

    Ethan Timor | Aligned Finance Pty Ltd
    http://www.alignedfinance.com.au/
    Email Me | Phone Me

    Active Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)

    David Thiu
    Participant
    @david-thiu
    Join Date: 2017
    Post Count: 75

    Hi Ethan,

    That’s no problems at all.

    The duplex was in Elizabeth South SA, and the area seemed pretty rough when I visited.

    Rubbish and mattresses lying in the front yard of some houses, road signs being pulled from the ground, and the duplex had been broken into the week before with a squatter found inside.

    Based on the photos posted online I thought a cosmetic renovation was all was to add a shower screen, bath vanity, and paint everything. It wasn’t until I inspected the property in person that I found that there were more serious issues with the property.

    Click here to see Picture of Duplex

    In terms of development potential, I visited the Elizabeth council with all the plans of the other development nearby and they said that was no problems at all, and similar dwelling could be placed on the site. Permission was needed to remove any trees with circumference of more than 2 metres though…

    Click here to see nearby Development

    P.S. Thanks for sharing the link on estimated construction costs

    • This reply was modified 1 year, 6 months ago by  David Thiu.
    David Thiu
    Participant
    @david-thiu
    Join Date: 2017
    Post Count: 75

    Just found a duplex thats recently been sold for peanuts…

    Click here to see

    If we can rent it out for $190/week rent without further works, thats 17.8% Yield

    I wonder who the buyer was…

    David Thiu
    Participant
    @david-thiu
    Join Date: 2017
    Post Count: 75

    Another interesting find in the area:

    Click here to see

    New property being sold for $300k (thats probably the fifth I’ve seen so far)

    Maybe there is a market for new houses in this area (5th one I’ve seen sold for that price range so far)

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