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Brisbane Propoerty Investment Advise



 
 
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  #1  
Old January 1st 05, 10:15 PM
Jeff Folland
external usenet poster
 
Posts: n/a
Default Brisbane Propoerty Investment Advise

Firstly, let me apologise if this question has been asked before, I checked
through some history and could'nt find it.

I am thinking about investing in on of the renovated woolstores (apartments)
on the river front (facing directly onto the brisbane river). A 2 Bedroom, 2
Bathroom apartment seems to fetch between $340k-$500k. They seem to rent for
about $280-$500 a week depending on furnished/condition etc.

I am looking for as much advise and as much information about these type of
units, rentals yeilds, pitfalls, body corporate probs etc, so I can make the
best informed decision.

It would be of particular help from people who currently own one of these
type of investments and rent it out, yeild and occupancy rates etc.

Also what do people think of Brisbane, compared with Sydney/Melb as a
location to buy in at this point of time, taking into account the stage of
the property cycle?

Thanks in Advance.

Jeff


  #2  
Old January 2nd 05, 03:56 PM
Travis Morien
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Posts: n/a
Default

First of all, read www.jenman.com.au

Neil Jenman strongly recommends against buying apartments from a
developer (you didn't say whether this was a secondary market purchase
or a purchase from a developer and I'm not familiar with the property
ocncerned).

The reason why he advises against this is because developers always
build into their prices a profit margin and the marketing costs, which
can be very substantial. In several articles he points out examples of
the large premiums one usually pays when buying from a developer:

http://www.jenman.com.au/NewsAlerts1.php?id=46
http://www.jenman.com.au/NewsArticles1.php?id=94
http://www.jenman.com.au/NewsQuestions1.php?id=81

You might also consider whether apartments, as opposed to properties
with a reasonable amount of land content, are an appropriate
investment.

In the long term, buildings depreciate and become worthless and are
demolished. The only purpose of a building is to provide a rental
income stream which hopefully will pay for the building before it gets
demolished. (It usually does).

Capital gains come from the land under the building. The ultimate
example of this are those examples of prime land being sold for huge
prices with a building on it that will only be demolished by the
purchaser. If land values double, the most you can usually hope for is
that the depreciation (real depreciation, not tax depreciation) of the
building will be less than the rental income. Buildings typically do
not go up in value and if you are paying a premium price for a shiny
new luxury apartment, consider whether this premium will still be there
in ten years time when the apartment is no longer at the cutting edge
of fashionability and newer, flashier, apartments are being offered.

A Melbourne valuation firm, Charter Keck Kramer, did a study of the
secondary market performance of apartments in Melbourne. They found
that even while median prices of apartments were rising strongly, on
the secondary market apartments only barely beat inflation (during a
"bull market").

The rising median price was to a large extent driven simply by the
rising cost and luxury of new apartments being offered. Each year
developers were going for more and more luxury. The rising median
price reflected the trend away from low end ****boxes to high end
luxury accomodation.

The Charter Keck Kramer study found that once people had bought from
the developers, when they came to sell it on the private market the
prices they got had not risen much since the purchase. The rise in
land values only barely outstripped the depreciation of the buildings.

A rule of thumb, which you can break if you happen to find an apartment
which is trading on an exceptionally high yield or has something really
special going for it, is that the best real estate investments are ones
where the value of the land makes up a large portion of the purchase
price and you are not spending too much on the building.

Luxury apartments definitely break that rule of thumb, though as I said
if you are getting a really high income return or see other qualities
in the property that make you believe it will do really well, you may
choose to disregard that rule.

Travis
www.travismorien.com

  #3  
Old January 2nd 05, 03:56 PM
Travis Morien
external usenet poster
 
Posts: n/a
Default

First of all, read www.jenman.com.au

Neil Jenman strongly recommends against buying apartments from a
developer (you didn't say whether this was a secondary market purchase
or a purchase from a developer and I'm not familiar with the property
ocncerned).

The reason why he advises against this is because developers always
build into their prices a profit margin and the marketing costs, which
can be very substantial. In several articles he points out examples of
the large premiums one usually pays when buying from a developer:

http://www.jenman.com.au/NewsAlerts1.php?id=46
http://www.jenman.com.au/NewsArticles1.php?id=94
http://www.jenman.com.au/NewsQuestions1.php?id=81

You might also consider whether apartments, as opposed to properties
with a reasonable amount of land content, are an appropriate
investment.

In the long term, buildings depreciate and become worthless and are
demolished. The only purpose of a building is to provide a rental
income stream which hopefully will pay for the building before it gets
demolished. (It usually does).

Capital gains come from the land under the building. The ultimate
example of this are those examples of prime land being sold for huge
prices with a building on it that will only be demolished by the
purchaser. If land values double, the most you can usually hope for is
that the depreciation (real depreciation, not tax depreciation) of the
building will be less than the rental income. Buildings typically do
not go up in value and if you are paying a premium price for a shiny
new luxury apartment, consider whether this premium will still be there
in ten years time when the apartment is no longer at the cutting edge
of fashionability and newer, flashier, apartments are being offered.

A Melbourne valuation firm, Charter Keck Kramer, did a study of the
secondary market performance of apartments in Melbourne. They found
that even while median prices of apartments were rising strongly, on
the secondary market apartments only barely beat inflation (during a
"bull market").

The rising median price was to a large extent driven simply by the
rising cost and luxury of new apartments being offered. Each year
developers were going for more and more luxury. The rising median
price reflected the trend away from low end ****boxes to high end
luxury accomodation.

The Charter Keck Kramer study found that once people had bought from
the developers, when they came to sell it on the private market the
prices they got had not risen much since the purchase. The rise in
land values only barely outstripped the depreciation of the buildings.

A rule of thumb, which you can break if you happen to find an apartment
which is trading on an exceptionally high yield or has something really
special going for it, is that the best real estate investments are ones
where the value of the land makes up a large portion of the purchase
price and you are not spending too much on the building.

Luxury apartments definitely break that rule of thumb, though as I said
if you are getting a really high income return or see other qualities
in the property that make you believe it will do really well, you may
choose to disregard that rule.

Travis
www.travismorien.com

  #4  
Old January 2nd 05, 06:52 PM
Jeff Folland
external usenet poster
 
Posts: n/a
Default

Travis,

Firstly, thankyou for the reply.

To paint a little more of the picture, the site is Teneriffe (mintutes from
the CBD - close but not too close). The woolstore is heritage listed, and I
would be buying secondary - not off the plan.

I take your point that the land value is what appreciates. What happens if
and when this building is demolished? Would I still own a "share" in the
land, and then be responsible for paying a "share" in building a new
structure?

Thanks again for the comprehensive reply.

Jeff


  #5  
Old January 3rd 05, 09:26 AM
Travis Morien
external usenet poster
 
Posts: n/a
Default

I take your point that the land value is what appreciates.
What happens if and when this building is demolished?
Would I still own a "share" in the land, and then be
responsible for paying a "share" in building a new
structure?


Jeff, most likely if a developer wanted to demolish the place you'd be
bought out before it happens, possibly you would be given a generous
price under a compulsory acquisition scheme, but I must admit I don't
have enough experience with real estate to tell you much else of value.

The point with land vs buildings is that if you buy a house, typically
60% or more of what you pay is a land investment, 40% or less is for
the building. If you buy a duplex, the percentage of purchase cost for
land is lower. For apartments, especially multi-storey apartments,
you'd pay an almost negligible amount for the land, just about all of
what you pay is for the building and fixtures because the amount of
land you have bought is just the land under your floor area, divided by
the number of storeys.

Of course this all translates to apartments having wonderful
depreciation allowances and lots of tax breaks, but unless an apartment
is offering a compelling yield and the building has a very low vacancy
rate I wouldn't want to invest in it.

Travis
www.travismorien.com

  #6  
Old January 3rd 05, 09:25 PM
savgoose
external usenet poster
 
Posts: n/a
Default

also try calling your state consumer affairs and ask for any advice re
investing in apartments, they wont tell you who to avoid, but will prob
give some advice as to what sort of things to avoid.

biggest problem ive heard is people paying way more than the property is
worthand not being able to sell to get their capital back , and low tenancy
rates i.e. not being able to get returns from rent they where lead to
believe.

If you are really keen on the place, wait until its built , then wait a
little longer and there will be a dozen people dying to get out of the place
and you can get a bargain price.

also after its complete and a years gone by, you get to see any faults like
poor masonry, leaky pipes, etc and may just thank the gods you didn't
invest.

bottom line is there's many opportunities to make money, and you only need
to jump on a bad one to lose it.



Jeff Folland wrote in message
...
Travis,

Firstly, thankyou for the reply.

To paint a little more of the picture, the site is Teneriffe (mintutes

from
the CBD - close but not too close). The woolstore is heritage listed, and

I
would be buying secondary - not off the plan.

I take your point that the land value is what appreciates. What happens if
and when this building is demolished? Would I still own a "share" in the
land, and then be responsible for paying a "share" in building a new
structure?

Thanks again for the comprehensive reply.

Jeff




  #7  
Old January 4th 05, 07:57 AM
Gregory Toomey
external usenet poster
 
Posts: n/a
Default

Jeff Folland wrote:

Firstly, let me apologise if this question has been asked before, I
checked through some history and could'nt find it.

I am thinking about investing in on of the renovated woolstores
(apartments) on the river front (facing directly onto the brisbane river).
A 2 Bedroom, 2 Bathroom apartment seems to fetch between $340k-$500k. They
seem to rent for about $280-$500 a week depending on furnished/condition
etc.

I am looking for as much advise and as much information about these type
of units, rentals yeilds, pitfalls, body corporate probs etc, so I can
make the best informed decision.

It would be of particular help from people who currently own one of
these type of investments and rent it out, yeild and occupancy rates etc.

Also what do people think of Brisbane, compared with Sydney/Melb as a
location to buy in at this point of time, taking into account the stage of
the property cycle?

Thanks in Advance.

Jeff


Its a nice area if you want to sip cafe affogato.

However I do NOT like units for investing, for various reasons.
- body corp costs can be expensive
- you can not easily do improvements like with a house
- small land component compared to houses.

Rental yields are low in all the inner Brisbane area & many outer areas.
I'm considering buying buying an older house in Wollongabba/Yeronga/Annerly
& renovating over a few years.

gtoomey

 




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