Three Small Units

Ok so I’m late on the details. If you were hanging out so much you could have left a comment on the original entry. But it’s ok the logs tell me a lot of you are coming back regularly.

The advertising was for a deceased estate auction $160K+ buyers for three 1 bedroom units. I know the building in Potts Point as I owned three units there until 1991.

I bought a unit in the building again in 1999 and sold it as a wrap. So I’m quite comfortable with the building. It has some problems: a dodgy hot water boiler and roof leaks. The strata levies have gone up 400% in 3 years not counting special levies. There is also a current bunfight between owners with proxy battles at every meeting.

Oh and the units are 33sqm each. That puts them in the difficult to finance category.

I hate going to auctions. There is no point in preparing for them because most times I am outbid. I went along just in case and to see what they sold for.

I wouldn’t mind buying the building piecemeal over the next 10 years or so.

The current rent is $170, $180 and vacant. The two existing tenants are willing to sign new leases at $200 as is.

The vacant unit is one I owned until 10 years ago! It was sold by the mortgagee in possession in 1991 for $81K (a song at the time). I bought it in 1987/88 for $47K.

I made an asking price offer of $179K last year on another unit in the building but the vendor decided not to sell. So I figured anything up to $179K was good buying.

Anyway I picked the first and third up for $167,500 and the second cost me $165,000. Now I’m busily organising finance and legal structures for the ownership. The gross yield comes in at 6.20% making them negative cashflow to start with.

More as it progresses

One thought on “Three Small Units”

  1. Nice one Paul. I’m intrigued now as to how you’ll put the finance together creatively! U mention u wouldn’t mind owing the building by piecemeal…does that preclude you from wrapping them out or are you taking a very long term view and willing to trade in and out of the block at the RIGHT price?

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