Home' API Magazine : September 2014 Contents 57
API SEPTEMBER 2014
SEPTEMBER 2014 API
Deco apartments. They are highly prized by owner-occupiers
and highly sought after in a peak market. Plenty of owner-
occupiers will pay a premium to secure a large Art Deco
apartment, and in good locations such as this, they tend to lease
out for much longer terms than smaller modern apartments. This
can save you the angst of having to lease out to new tenants
¿ WHAT ARE ITS CONS AS AN INVESTMENT PROPERTY?
EvP: While the living room and study get the morning sun, the
other windows in the property face south so it could get dark
or gloomy in the cooler months. It lacks privacy with external
stairs overlooking one of the bedrooms. The apartment needs
an update, and it would be more secure if it had entry gates
and a front fence. It will attract interest from homebuyers with
emotional attachment that may drive price up and reduce
the initial rental yield for an investor. There’s a lot of proposed
development activity in the suburb too, so that may inhibit
growth in rent returns.
IJ: The rental yield is lower than if you purchase a more modern
apartment because you can get the same return and pay less.
You tend to pay less for a more modern apartment because
they’re generally smaller. Art Deco apartments are usually
the biggest style you can find, and in the past 20 years or so
developers are more likely to build smaller apartments on a
block to maximize their return. You’d also have a much lower
depreciation deduction with this listing as the building was built
well before 1987.
¿ WHAT ADDITIONAL QUESTIONS WOULD YOU ASK
EvP: What’s the make up of the block in regard to owner-
occupiers and renters? Are there any proposed maintenance
levies for the owners corporation? Are offers considered prior
to auction? Would the seller allow early access to the property
to market for a prospective tenant a couple of weeks before
settlement? What are the preferred terms from the vendor? Is
there a lot of interest from other buyers?
IJ: Why is your vendor selling? What settlement periods are on
offer (not ‘what settlement period does the vendor want’)? Do
you have to run the property through to auction? Asking how
many options an agent offers for settlement can give you an
idea of how desperate (or not) the vendor is to sell. If they’re
demanding a short settlement there may be an added impetus
to sell. If they’re offering only long settlement, they’re generally
under less pressure.
¿ HOW HAS THE MARKET BEEN PERFORMING IN THIS
SUBURB AND FOR THIS PROPERTY TYPE?
EvP: There’s been good interest for these types of properties
at this price point and this is likely to continue. Based on
some recent sales of two-bedroom Art Deco apartments in the
area that achieved $665,000, $720,000 and $860,000, it should
comfortably sell over the quoted range.
IJ: Art Decos in this suburb have been highly sought after for
as long as I have been in real estate. In this suburb, it would
potentially be the most sought after style of property, but many
of these properties are old, and haven’t been cared for very
well. I would make sure the owners corporation is sound and
¿ WHAT IS THE MARKET OUTLOOK FOR THIS SUBURB AND
FOR THIS PROPERTY TYPE?
EvP: Hawthorn is one of Melbourne’s most desirable suburbs
with a median house price exceeding $1.5 million. The unit
median sits around $540,000 and the older style Art Deco
apartments outperform the median with a high demand and
limited supply for such properties. The contemporary-style and
60s style apartments still perform well in the area, but Art Deco
is more preferred.
IJ: Excellent prospects for capital growth. This precinct has
some of the most sought after property in Melbourne within
walking distance to some of the best private schools in the
state. There will always be a market for period-style property in
¿ WHAT SORT OF INVESTOR WOULD THIS PROPERTY
EvP: It’s important for the investor to get professional advice
from their accountant, financial planner, lender or mortgage
broker first to understand what investment approach best
suits their needs and goals. Doing this first will also include
understanding the investor’s cash flow analysis. This in turn
will give some guidance on the type of property to buy. This
particular property and this type of property, when well located,
can usually command a market premium at any given time. It
would be suited to an investor looking for a long-term buy and
hold strategy aiming for capital growth more so than rent return.
If the investor borrowed 80 per cent to 90 per cent, it would still
be negatively geared so it may suit an investor with a higher
income or with equity in their property or property portfolio. If it
were already renovated, it could suit an investor buying in their
self-managed superannuation fund.
IJ: This is a long-term buy and hold for someone within a very
high tax bracket. This property is all about capital growth, not
yield, and it will be expensive to hold, so a very high income
professional that has a long-term hold mentality.
¿ AT THIS PRICE RANGE, WOULD YOU TALK TO THE AGENT,
OR WALK AWAY?
EvP: At $550,000 to $600,00 I would definitely talk to the agent
further. I would expect it to sell for at least low to mid $600,000s.
Should the quote be adjusted upwards during the campaign, I
would walk away if it were quoted to exceed $660,000 . It has a
fantastic location so I expect there will be multiple interested
IJ: I’d talk. The asking price bears absolutely no resemblance to
what this property should sell for. The last sale of an apartment
of this size in the building sold for $782,000 . While our target
isn’t in as good condition, it will absolutely be worth over
$700,000 . If my client had the attributes mentioned above (long-
term hold) then I would go after this property. If I could buy the
property within the advertised range, I would write out a cheque
æIf I could buy the property
within the advertised range,
I would write out a cheque now
myself!Æ Ian James
\\ OPEN FOR INSPECTION
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