Smart advice for buyers who think big

When considering an investment in a block of units it is important to have inside knowledge about the common obstacles you will need to overcome. The two biggest hurdles to overcome are finding other people with a common investment aim that can buy with you, and finding a block of units at a fair price where significant improvements can be made.

The trouble with most blocks of units for sale is that they have not been strata titled, which makes it more difficult and risky as you can’t all get individual titles. Pooling money and buying as a joint venture is risky as people’s circumstances change and when one wants out, everyone needs to get out.

Here are some tips, based on my personal experience to successfully invest in a block of units.

1. Recognise a good investment opportunity

   I came across a block of seven units in Coogee, NSW, where two of the units were listed for sale, but they seemed too expensive. However, I then found out from another agent that he had three potential silent sales coming up. I saw a great opportunity to own three quarters of a block at once and suddenly the initial 2 units didn’t look quite so costly.

2. Persistence, persistence, persistence

   To make major changes to a block, if more than 25 per cent of the strata vote goes against your plans, you can’t proceed. It once took me three months of persistence to convince a unit owner to sell his two units to me, giving me over 25 per cent of the strata vote. Whether it takes 3 months or 3 years remember that property investing is a long term game.

3. Invest in a town planning firm

   I hire town planning firms to help me go through pre-DA meetings with the council to get them onboard with my plans.

4. Employ an architect

   I always interview numerous architects because it is likely that one will hit me with an exceptional idea. For example the third architect I interviewed for a project once suggested building a four-level block, which could host an impressive entrance foyer and three whole-level studio apartments (costing $750k and work $1.2 -1.5m in value). The architect also reconfigured the car park level to increase the car spaces from nine to 22 (adding a potential value of $650k).

5. Be prepared to re-invest in your investment

   Before buying into each unit in the block I suggest you advise yourself and notify each owner that they will need to spend an additional $5-15,000 on a development application to really see the potential in the units.

Comments

[greg]

Great pointers, I think it still would be a challenge to a new investor to understand the risk and to then take the risk of such a project with little experience in renovating or building.

[Nick]

Fair point Greg, but I think Chris is really aiming this advice at more seasoned investors who have some prior experience.