Purchase or Pass? Two-bedroom unit in Bronte
In this week’s Purchase or Pass, Chris Gray is joined by Stuart Waugh from Bell Partners to take a look at a potential investment property and investigate whether we should buy it based on who looks after the body corporate.
This property was actually bought four years ago for $735,000. It’s a two-bedroom unit in a small block of four, 7.8 kilometres from the Sydney CBD. Even though it’s just 100 metres to the cafes and leisure facilities, it’s in a very quiet street with little through traffic. It has undercover parking out the front and a shared courtyard out the back.
{qtube vid:=RxH2xP9cxGQ&feature=youtu.be}
Chris Gray: Now Stuart, before we get into the meat of things, does it roughly tick the boxes for most of the stats so far?
Stuart Waugh: It does. It has transport, it has cafes, it’s a small block, and it has good facilities within it. It would also be quite neat and tidy, so it ticks the boxes to start with yes.
Chris Gray: Now, the biggest dilemma here is the self-managed body corporate. For most people I know it could be called different things in different states, can you explain roughly what the body corporate is?
Stuart Waugh: The body corporate is basically the people that will govern how things are done, so the owners will determine what they want to do to it, and then the body corporate and strata managers will basically manage how that’s carried out in the property.
Chris Gray: Yep, so it’s something you’ve got to have on all blocks of units but the classic thing is, and I always say it’s our parents generation that are always trying to make money by saving money. So it costs $2,000 or $3,000 a year to administrate it and get professionals in, so you always get these people, typically older people, that say no we can do it ourselves but is that a forced economy?
Stuart Waugh: Absolutely, you can’t find people to spend $2,000 of their time to try and do it properly but you can actually find a professional body that will do it for $2,000 to do it really well so not only that, it’s always going to get shuffled to the back of the time of what you’re going to get done, if you are doing it yourself rather than paying someone to do it and doing it properly.
Chris Gray: Quite often you get one person in the block that thinks he’s king of the castle and tries to take it over and run the whole thing. But in this particular block, a lot of the owners didn’t get on together, so what are some of the potential downsides if it’s not run properly?
Stuart Waugh: Nothing gets done. If you can’t get agreement because people are fighting or not seeing eye to eye then you won’t get anything done. The property will start to get aged and not well maintained and therefore the purchase price or the sale price of the property will start to go down. It’s a big deterrent for anybody trying to buy that property if you can’t get a body corporate that gets on and gets things done.
Chris Gray: Exactly, because we do strata inspection reports every single time we buy property and if its self managed and there's no records because nobody’s kept any, then it gives you no confidence in buying the property, so certainly a bit of a risky one there. Purchase or pass on this one for you?
Stuart Waugh: I say purchase.
Chris Gray: Well we actually bought this unit for a time poor client a few years back and got our property manager involved in the strata meetings because the client didn’t want to get involved. Now over time the property manager convinced them to hire professional strata managers so it’s all since worked out for the best. It could have been an absolute nightmare though but the block is improving year on year. If I had my choice again, I would still go for a purchase as well.