There’s a fascinating question in the forum this week which should have property tragics reaching for their calculators.
Our Flatchatter is seriously considering buying an apartment for about $500k. However, he has discovered that the 70-odd unit development is about $1.5 million in debt and the capital works fund is $30k short.
There seem to be a number of special levies in the pipeline too – presumably to top up the capital works (or sinking) fund.
“Should we run immediately or look into finances deeply first?” they ask.
The first instinct is, of course to run away very far and very fast. But is it the smart thing to do? After all, there are people spending a lot more on units with no idea of what the ultimate costs of defect rectification may be.
Simple fact: all apartment buildings in Australia have defects. This building’s defects have been discovered and, it seems, have been fixed.
So let’s break down the finances. It may be that the vendor has already factored in the debt, knowing that will keep the price down.
So how much cheaper is this apartment than a unit in a similar block in that suburb but which doesn’t have a $1.6million hole in its bank account?
Also there’s the money the purchaser is saving from not having a higher mortgage for the next few years. Let’s call the total difference Factor X.
Now, with one per cent of the unit entitlements (10/1000th), our Flatchatter is up for $16,000 to pay their share of the debt that they would be taking on when they buy the unit.
Weigh that against whatever Factor X is and they could be ahead of the game because what we have is a reduced mortgage and a building that could be defect-free (although you’d want to look into that quite closely).
I wouldn’t run away just yet, not until I’d discovered how thorough the defect checks and rectifications have been. It could be that this was previously a bad block that’s been fixed up and is now being well run and that would add up to a good investment to many people.
Flatchatters – especially those with a better grasp of maths than us – can add their one percent HERE.
Elsewhere on the forum
- Our strata manager won’t hand over our essential documents to the committee unless we pay them an “administration fee”. That’s HERE.
- Waterproofing fail leads to bathroom reno – but is owner asking for too much? That’s HERE.
- Committee member has installed an air-con without permission – the discussion isn’t getting any cooler. That’s HERE.
- Audio professional gets Tribunal to listen over noise complaints. That’s HERE.
- Does the strata committee really need to hold a general meeting to approve minor changes to common property? That’s HERE.
How to ask and answer questions
Anyone can read our posts at any time, but you must be registered to ask or answer questions. However, there are so many easy ways you can search, access, ask questions and reply to others’ queries once you have registered. And you do that using the green “register and sign in …” box on this page.
The easiest way is to post new topics is to click on the yellow “Click Here For The Forum” box, find the category you think applies to your issue, click on that then click on “Start new topic”.
If you want to reply to a recent post, they are listed on the right on a computer screen or after the ads on a phone. Click on the links and away you go.
Whichever route you take to get there, the best way to keep up to speed with what’s happening is to register (if you haven’t already done so), then login and subscribe for free to the topics that interest you most.
That way you’ll get an alert whenever the discussion moves forward, and you can also chip in with your own comments and questions. See you in the Forum soon, we hope.