No Bull Real Estate

Many smart buyers like the idea of investing in, and revamping, an entire block of units to make a tidy profit. But if you haven’t done this yourself, it can be difficult to advise clients on the best approach.

Whether you are looking to personally invest in a block of units or assisting buyers, it is important to have inside knowledge about the common obstacles so that you can pass on, or utilise the best ways to go about it. The two biggest hurdles to overcome are finding: other people with a common investment aim that can buy with you, and finding a block of units at a fair price where significant improvements can be made.

Buying a whole block of units yourself is costly, especially if it’s in a blue-chip area. Advising clients to buy with others – who each buy individual units – is a great way to go. However, the challenge is finding investors who want to buy into the same block and have the cash available to buy and renovate all at the same time. The trouble with most blocks of units for sale is that they have not been strata titled, which makes it more difficult and risky as you can’t all get individual titles. Pooling money and buying as a joint venture is risky as people’s circumstances can change and when one wants out, everyone needs to get out.

It’s too hard to renovate when you have a unit in an existing strata-titled block as they have too many owners with different agendas, and many whole strata-titled blocks that are up for sale attract professional builders and developers that renovate at a fraction of what you or client can. The upside of overcoming these two hurdles is that rundown blocks often have massive potential for improvement. There are endless possibilities, depending on what the council will allow and how you manage the process. Here are some tips, based on my personal experience to successfully invest in a block of units.

Recognise a good investment opportunity 

I came across a block of seven units in Coogee, NSW, where two of the units were listed for sale, but they seemed too expensive. However, I then found out from another agent that he had three potential silent sales coming up. I saw a great opportunity to own three quarters of a block at once, and suddenly the initial two units didn’t look quite so costly.

Use your resources

Being a buyers’ agent for time-poor professionals, it was fairly easy to find some common- thinking investors who had the cash to buy and additional money for renovations down the path. One client bought the two penthouses and three others bought the silent sales. Properties sell very quickly in the current market, so you need your co-investors set up from the start.

Persistence, persistence, persistence 

In the case of making major changes to a block, if more than 25 per cent of the strata vote goes against your plans, you can’t proceed. In my case, another owner in the building held two units – giving him a 26 per cent vote. Looking to make an offer for these units, I tried contacting him every way I could – through his strata manager, through the property manager and even via agents who had his details. After three months of persistence, I received a call from the agent that had the listing and I bought the final two units. Whether it takes three months or three years, remember that property investing is a long term game.

Invest in a town planning firm 

I hired a town planning firm to help me go through a pre-DA meeting with the council to get them onboard with our plans – to build another penthouse level (cost circa $2M and worth $3M), extend the balconies (adding $50-$100K in value to each unit), render the block (adding $25-$50K in value to each unit), add three to four extra car spaces (worth $150-$200K overall), and landscape the whole area.

Employ an architect

I interviewed four architects, and one of them came up with an exceptional idea – building a four-level block, which could host an impressive entrance foyer and three whole-level studio apartments (costing $750K and work $1.2-$1.5M in value). The architect also reconfigured the car park level to increase the car spaces from nine to 22 (adding a potential value of $650K).

Be prepared to re-invest in your investment

Before we bought into each unit, I suggested to each owner that they would need to spend an additional $5-$15K on a development application to really see the potential in their units. At a minimum we would be allowed the render and add glass balconies, and at a maximum we could add extra levels and car parks. If you’re buying $600-$700K units, it’s well worth re-investing so you get their true potential. Investing in a block of units the smart way can turn into a goldmine of opportunity. Further, since each buyer owns their individual units themselves, there is a fraction of the risk that would normally come with a deal of this nature.

For a FREE copy of the book, The Effortless Empire: The Time-Poor Professional’s Guide to Building Wealth from Property, visit www.yourempire.com.au

via www.reinsw.com.au