The true cost of buying an investment unit: Are these the numbers developers don’t want you to see?
As property prices increase around Sydney, much discussion is being had around whether investors and home buyers will head more towards units as opposed to houses to save on the costs.
Edwin Almeida, from Just Think Real Estate and Sydney Real Estate TV, explains that you really need to look at the true cost of buying an apartment when undertaking a financial comparison to a house. In fact, it’s not all about the asking price.
Almeida asks whether it’s a simple case of the unaffordability of housing, or whether there’s more behind the drive to move people into apartment buildings.
“Well let’s look at the numbers and the true costs buying into an apartment represents; after all, these are figures most marketing companies and agents don’t want you to know,” he said, providing the figures outlined in the video below.
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These figures have been derived from Almeida’s own property management books on his rent roll at Just Think.
He provided the following numbers (as outlined in the video):
Average Two Bedroom Apartments Costs
A: Costs
- Average Strata levies $1600 x 4 = $6,400
- Average Water Rates $190 x 4 = $760
- Average Council Rates $230 x 4 = $920
- Average Property Management fees annualised = $2,100
- Average vacancy rate and letting fees = $1,200
Total = $11,380
B: Rent Annual
- Average rent $550 x 52 = $28,600 per year
C: Interest Rate
- Average interest rate on investment $550,000 = $29,975 per year
Therefore:
B – C = -$1350 (D) Short Fall
Therefore:
D (Short fall) + A (Costs) = $12,755/52 weeks
= $245.29/week out of pocket “top up”
*Other costs not factored into the purchase of the property: Stamp duty if applicable
Source: Just Think Real Estate
“An increase of 30% leads from $245.29/week to average costs $318/week out of pocket ‘top up’ -what we are noticing of late across Sydney [in terms of property price growth figures],” said Almeida.
He also pointed to increases in levies, in one instance of 100% - from $1,600 to $3,100 – with no real reason, but with rents staying stable at $580 per week. This property is an apartment in a Parramatta HIGHRISE, where Almeida manages three properties.
“Be sure to calculate real costs of purchasing into new apartment investment opportunities before making the decision to buy,” he said.
So, investors and apartment owners, we’re asking you what your costs look like around the country? What are the fees that have increased or have been unexpected? Are you having success with the apartment strategy?
