Purchase or Pass? A lingering property in Zetland - an opportunity or warning sign?
On this week’s Purchase or Pass Chris Gray is joined by Arthur Charlaftis of realestate.com.au to look at something that’s been on the market for a long time and see whether it could be an opportunity to pick up a bargain.
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It’s a three-bedroom, three-bathroom townhouse style property in a unit complex, five kilometres from the Sydney CBD. It’s got double parking and the complex includes a gym, pool and sauna and the strata fees are $1,300 a quarter. The property is very close to the transport links to the airport, city and local beaches. It was listed in September 2012 for $850,000 plus, rose to $880,000 plus and then was still listed in June 2013 for $845,000 plus.
Chris Gray: I guess to start with, what are the positives on that property?
Arthur Charlaftis: The rent seems to be geared at about greater than 5% so the rental return is not bad, assuming that’s achievable. It’s a three-bedroom, three-bath residence, which is sort of unusual to find in terms of that situation. I think whilst it’s a townhouse it has all the benefits of a large complex.
Chris Gray: And that’s the thing; certain people want that kind of stuff. It’s almost like having a freestanding house, or maybe some people that are downsizing don’t want all the maintenance of having the house, the garden and the pool, where as they can get into a complex and use all that sort of stuff.
Arthur Charlaftis: You mentioned it’s been on the market for a long time, that could be an opportunity, how do you see that?
Chris Gray: A lot of people would usually say it’s an opportunity, where as from what I know from the areas I deal in, I don’t deal in this area, is that good properties sell well and that’s what Tom says. His properties sell very quick because they’re in massive demand. So I think in the hot suburbs, I think it’s a bad thing because it means its overpriced or there’s something wrong with it. But again, maybe in more a secondary area, that’s the thing, it’s just an opportunity there.
Arthur Charlaftis: Right, ok. What comments do you have on the strata fees?
Chris Gray: For strata fees I’d say that’s pretty expensive. So normally, we’re buying $600,000 to $900,000 units in block without all those amenities and we’re maybe paying $600 to $700 a quarter, so to pay an extra $600 quarter is to pay another $250,000 to $300,000 or so, and that eats into your rent as an investment. So the thought is, they had three different agents over that time. I tried to track it online, and even tried on realestate.com.au and I think they’ve potentially taken it off the market so I don’t even know if it sold for that kind of money - certainly interesting. Another thing I’ve picked up is there are lots of similar developments and that’s a hard thing to stand out from the crowd. So, it’s a tough one. What are your thoughts?
Arthur Charlaftis: Based on the strata fees, because I do think they’ll offset the rent as well as what time it’s been on market, there’s always a worry when that is occurring, so I would pass.
Chris Gray: While I have friends that live in this area and absolutely love it, I’m not necessarily a fan of large blocks in highly densely developed areas, especially when there are expensive gyms, pools and saunas to pay out of the rent. I think the time on the market to me is a warning rather than an opportunity so I’m going to pass as well. But I would put it in there, for the right type of person, it potentially is the right kind of opportunity.
