Purchase or Pass? A unit previously passed on in Tamarama with Arthur Charlaftis

In this week’s Purchase or Pass, Chris Gray is joined by Arthur Charlaftis of realestate.com.au to analyse a potential investment in a block of units that has previously been turned down.

It’s a two-bedroom unit with a security car space in a block of 18 units, 7.3 kilometres from the Sydney CBD and under a kilometre to the local action. There have been some major damp problems with the balconies leaking into the garage and they’ve already raised $380,000 to solve the problem. As part of this repair the neighbouring owners to this unit are looking to extend their balconies over the garage roof, which will really increase the appeal of the property with plenty of outdoor living.

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Chris Gray: What are your initial thoughts there?

Arthur Charlaftis: Well I was actually going to throw it back to you Chris, because this is one you passed on I believe, so tell me a bit about why you passed?

Chris Gray: With the other unit we were looking at, it was more to the rear of the block and the strata fees here were pretty expensive, around $1,100 rather than $600 or $700. It also had an outdoor pool, but they had all these strata problems we’re talking about with the roof that were unresolved. As you can see, they’re raising $380,000, that’s quite a worry to get in if they haven’t solved those problems. So there was just nothing that appealing about it. There are a lot of negatives.

Arthur Charlaftis: So, what’s changed? Have you changed your view on it?

Chris Gray: The massive change was the money being raised, so they’ve actually found out what the problem is with the leaking garage. They have to change the whole of the garage roof, so that’s a major thing, but they’ve raised the cash. But there’s this opportunity to really increase the balcony, they’re going to extend that the whole way out, and get a lot more outdoor living space, which really changes when you’re living in a unit. And it’s getting 5.5% to 6% rent. So it looks pretty good now.

Arthur Charlaftis: What do you think about maintenance in terms of moving forward? Do you think that some of that’s been resolved?

Chris Gray: Yeah, so they’ve had concrete cancer in the past, but that’s all been sorted out. They’ve spent $380,000 on the building, so that’s going to sort a lot of stuff out. So suddenly, it’s almost like being in a brand new building, there’s nothing to sort out. That just shows how suddenly a no can turn into a yes. I guess one of the things I was going to ask you was; this is a property we got as a silent sale. So what that means is we get in before it goes on the market, so unfortunately you don’t get any revenue on your site, but obviously the pictures that we took are pretty amateur. I thought it’s probably like what agents would do 20 years ago. If those pictures appeared on your site, what sort of coverage is it going to get?

Arthur Charlaftis: Yeah you’re right, the photos are pretty amateurish and one of the things we know is 65% of our page views on our site really relate to the photos. So the photos are really critical and as we’ve talked about, nine out of 10 people go online to look at property and basically the first inspection occurs online. So even if that was on [the photos] there is a chance that the photos might not have got too much interest.

Chris Gray: Exactly, because you’re not going to get the emotion going. What we always say to our clients, it’s like, if you want it to look beautiful and pretty on the internet it’s a lot easier for you to see it but you’re probably going to pay a higher price. Whereas, if you have really bad photos that we’ve done on our iPhones, at least no one else knows about it so bad pictures, cheaper price. Most of the clients would rather have bad quality pictures and have a cheaper price. So purchase or pass for you on this one?

Arthur Charlaftis: With some of those changes I think it’s moving towards a purchase

Chris Gray: While we did turn down a unit in this block before, this particular unit offered a great opportunity with an already existing great rent. It will have a great outdoor area with views in the background, so we were over the moon to purchase it, especially as a silent sale before it came on the market, so I’m going to purchase on this one.