Good buy or bad buy? In Mandurah WA

[mandimoo]

Hello!

My husband and I looked at a high rise apartment a week ago in Mandurah WA, we really liked it but did not do anything yet as we wanted to check that we could use it as holiday accommodation. Anyway the apartment is 114sqm and a 3x2, it was built in the early 80's and although it has been painted and has new carpet the bathrooms and kitchen are original and we would need to renovate before we sold it. It has a large balcony with views of the estuary and the ocean, all rooms in the house except for the main bathroom have ocean views.

I am freaking out about house prices maybe dropping further and the fact that the rental appraisal was only $300 per week and the strata fees are $100 per week (building has 2 elevators, tennis court and a large pool area on 1 acre of gardens) so as we are already negatively geared this would be a very negative investment although a lot of this would be covered by tax as hubby is on high income.

We would be buying the place if we could get it for $50k discount from the advertised price (16%). It would be the cheapest price that one of these apartments has sold for in a long time due to the market being very bad and that the apartment was inherited and the new owners want to offload it because of the strata fees.

My question is I suppose, given the information presented would you consider buying it based on hopeful capital gains or for a holiday home or do the negative cash flow and poor market make this apartment too much of a risk to be a bargain?
Also what do you think of Mandurah in general (Halls Head) if you have properties there?

You might notice that I ask a lot of questions, sorry! I am hesitant to ask family besides my mother (who as a single mother on a teachers wage owned 3 properties outright!) because they are anti-investment/risk so they usually discourage anything and have little experience of their own to base this on.

Thanks

 

[Ricky]

"I am hesitant to ask family besides my mother (who as a single mother on a teachers wage owned 3 properties outright!) because they are anti-investment/risk so they usually discourage anything and have little experience of their own to base this on."

Hi, I wouldn't exactly call a single mother on a teachers wage who was able to outright own 3 properties, someone who has little experience.
Kudos to her.

I would not purchase the property in question.

 

[Peter Parker]

Dropped into Mandurah last month - never seen so many FS signs in my life. Had a bite at a nice cafe and they've got a good second hand bookshop down one of the arcades back from the foreshore. I don't mind the place, though I still think of algae and mozzies.

My husband and I looked at a high rise apartment a week ago in Mandurah WA, we really liked it

Property is slightly different from Facebook - you can 'like' something but it won't necessarily be a top performer.

but did not do anything yet as we wanted to check that we could use it as holiday accommodation. Anyway the apartment is 114sqm and a 3x2, it was built in the early 80's and although it has been painted and has new carpet the bathrooms and kitchen are original and we would need to renovate before we sold it.

Early '80s. So not getting building depreciation makes it inferior to something built in the '90s or later. Its price would need to be lower and/or yields higher to offset this.

I am freaking out about house prices maybe dropping further and the fact that the rental appraisal was only $300 per week and the strata fees are $100 per week (building has 2 elevators, tennis court and a large pool area on 1 acre of gardens)

They're terrible numbers, especially the ratio between the two.

Strata fees are far worse than interest. Interest falls in real terms due to inflation eroding the real value of the amount owing. Whereas strata fees are a function of insurance and labour. These will rise by inflation if not higher.

so as we are already negatively geared this would be a very negative investment although a lot of this would be covered by tax as hubby is on high income.

Still a loss, whether high income or low income. And if circumstances change, and the high income is no more, you're stuffed. Profit or breaking even is always better than a loss, no matter how much the taxman sugar-coats it.

You need to work out how many years it will take to become neutral, and if it's too long then give it a miss.

If you really did want big tax deductions (which have a risk as outlined above) you'd be better off making use of building depreciation by getting something 10 years newer (with low or no strata costs, and maybe cheaper without views) than relying on getting a portion back of some immovably high but completely preventable strata costs.

We would be buying the place if we could get it for $50k discount from the advertised price (16%). It would be the cheapest price that one of these apartments has sold for in a long time due to the market being very bad and that the apartment was inherited and the new owners want to offload it because of the strata fees.

Here's another problem. The high strata fees are depressing its appeal. Anyone who buys it will have this curse as well. If a place is cheap and the reason for the cheapness doesn't go away, then it will always be cheap, and possibly also hard to sell.

I'm a fan of cheap properties, but only if the reason for the cheapness is known and I'm confident it won't be stuck with the property forever (unlike a high strata fee).

My question is I suppose, given the information presented would you consider buying it based on hopeful capital gains or for a holiday home or do the negative cash flow and poor market make this apartment too much of a risk to be a bargain?

Sounds like a lemon.

But if you can find a normal house on a bit of land somewhere between the foreshore and the station, study the market, get finances sorted, traipse through heaps of homes and put in cheap offers, then I don't think you can go far wrong.

 

[sanj]

Hello!

My husband and I looked at a high rise apartment a week ago in Mandurah WA, we really liked it but did not do anything yet as we wanted to check that we could use it as holiday accommodation. Anyway the apartment is 114sqm and a 3x2, it was built in the early 80's and although it has been painted and has new carpet the bathrooms and kitchen are original and we would need to renovate before we sold it. It has a large balcony with views of the estuary and the ocean, all rooms in the house except for the main bathroom have ocean views.

I am freaking out about house prices maybe dropping further and the fact that the rental appraisal was only $300 per week and the strata fees are $100 per week (building has 2 elevators, tennis court and a large pool area on 1 acre of gardens) so as we are already negatively geared this would be a very negative investment although a lot of this would be covered by tax as hubby is on high income.

We would be buying the place if we could get it for $50k discount from the advertised price (16%). It would be the cheapest price that one of these apartments has sold for in a long time due to the market being very bad and that the apartment was inherited and the new owners want to offload it because of the strata fees.

My question is I suppose, given the information presented would you consider buying it based on hopeful capital gains or for a holiday home or do the negative cash flow and poor market make this apartment too much of a risk to be a bargain?
Also what do you think of Mandurah in general (Halls Head) if you have properties there?

You might notice that I ask a lot of questions, sorry! I am hesitant to ask family besides my mother (who as a single mother on a teachers wage owned 3 properties outright!) because they are anti-investment/risk so they usually discourage anything and have little experience of their own to base this on.

Thanks

why would u be interested in buying it for 50k less? based on 50k being 16% discount the property is on market for 312k. you are only going to get 200/wk after strata fees and before all other costs. it is a dog of a property, terrible. move on.

 

[mandimoo]

Well to be honest we are mostly interested in it for our personal use, we would rent it out for the first year or so at the low rent (our 3rd baby is due march 3rd so I do not want to be stuffing around with an apartment) and after that we would renovate it and probably use it for a holiday home and put it on Stayz etc to get some income. I am good with my marketing so I have high enough hopes of low vacancy.

Mandurah has really copped it lately with the prices, which I assume is because it is so far from Perth, during the boom some of the same apartments (albeit modernised ones) sold for 700-900k. We have a lot of baby boomers due to retire in the next 5-10 years or so, I would hope that Mandurah may be attractive to this new generation of retirees, and even if the price never picked up I still think we would have found a cheap escape for ourselves that we could enjoy for a long time, I know it isn't as cheap as going overseas once a year but at least we don't have to pack or get a housesitter to feed all of our animals!

By the way when I said my family were inexperienced with property investing I meant my father and my in-laws, my mum has never been afraid, she was lucky though, she made a heap from that crazy boom!

 

[gooram]

I'm not sure why you would want to holiday in mandurah?? everyone is different I guess.

As a place to invest? I see it as mortgage belt suburb of perth, with perhaps a small tourism/retirement angle.... get the hell outta dodge!!

 

[Ausprop]

I think mandurah has bottomed out and there are great deals to be had there. if it were me - go grab a subdivisable block with a bunky house on it. you shoul dbe able to get a 4 - 8 unit site for around $300k. you can then have some decent land, do it up, then one day bowl the whole thing and live off one or two of the villas that you build

 

[jaycee]

I think mandurah has bottomed out and there are great deals to be had there. if it were me - go grab a subdivisable block with a bunky house on it. you shoul dbe able to get a 4 - 8 unit site for around $300k. you can then have some decent land, do it up, then one day bowl the whole thing and live off one or two of the villas that you build

Not sounding too bad at all....

 

[Seabreeze]

Not sounding too bad at all....

Depends whether or not you need to borrow money to do it. If you don't then it could be OK - builders are keen as mustard with pricing to match. Although off-loading any of the finished product would require a keen price as well in this market... if you just rent them out the net yields don't look too flash.

If you do need to borrow money, then I hope it's not a lot!

Mandimoo - a good investment shows good numbers and gives you a net income for owning it. IMO what you posted does not fit the criteria of a good investment, no matter which way you look at it. The most likely outcome is that it will be a money pit for as long as you own it.

 

[jaycee]

well I just meant compared to the average... compareed to paying over $350k for something like balga for a 3 unit site.. a 4 -8 uit site might hae more value a few years down the track ?....

 

[Ian (WA)]

M/Moo,

Yes, I have noticed you asking a lot of questions right throughout this forum and you should be commended for it.

However, all I glean from those questions is that you are very, very unsure of many, many things related to real estate investing and to this end all I see is you getting burned and badly.

The apartment as a 3 x 2 is only 114sqm.......that isn't even big enough for a vertigo stricken rat with one leg!!!!.......even if it is just a holiday home or whatever.

I won't even bother with the $$$ in question because you are going to get smashed and then you want to throw more money into a reno??? If hubby is on good money, then go speak with a buyers agent or someone of that ilk who has half a clue so that you can put your money into a property where you don't have to "....hope for growth", because you will get growth with an appropriate property.

The strata fees are obscene for a view over the mosquito flats.......and have you tried travelling in & out of Mandurah for a week?......it is madness down there.

The reason Mandurah tanked a few years ago was because it was so over-priced after the first round of semi-retiring wannabe white sandshoe & chardonnay brigade took over the canals & estuaries like cane toads diving into a septic tank as they all got their hands on their superannuation, or sold up the big house in Applecross & Attadale back in 2003 - 2005. Then they all realised that the place is an ants nest, over-rated and a bloody long way from Perth, so with that and the onset of the GFC, all the cane toads decided to, or had to, liquidate their spiffy apartments due to their war chests of shares and managed funds sinking faster than their fat backsides into the plush leather seats in their Audis. Mandurah pricing around 2006-2008 was totally, totally insane....the pricing was worse than Rose Bay apartments overlooking Sydney Harbour and these dozy prawns were buying in Mandurah???.....(which is really just Rockingham South with as much appeal).

Yes, you may well be buying in at the bottom, but all you're gonna do is keep going further down into the septic tank while blowing money hand over fist.

I'm really sorry, but you need to get a few things in order first (seriously you & hubby need to work out what your goals are, then get someone to have a look at how you structure & manage your financial life) or you may as well spew hubbys' $100 notes into your garden shredder.

I'm with the other responders in this thread......don't even think about it.....bad, bad,bad!!!!

Sorry, but you're only asking for trouble.

Ian.

 

[yadreamin]

M/Moo
You have had some good advise posted so far.
Let me see if l can add my 2 bobs worth.
The Mandurah market has been slashed at the throat to say the least.
I am one who is bleeding.
The apartment market is way over supplied plus so many paople have realised that its not necessary to live in an apartment here cos there is no shortage of land close to the action weather its beach, estuary,bush or cafes that you want to be by.
The apartments you are looking at are old and you will be up for big $$s for a make over/ maintenance.
You can buy any number of units new or near new at bargain prices at the moment.
You want to use it for holidays, will that be at the same time every other family want to holiday as well?
the holiday rental market is also well over supplied here. Even big name brands with big big $$s behind them for marketing are struggling to attract enough tenancies to pay the bills. You can rent a fully furnished penthouse here at the mo for $400 per week. How many weeks holiday a year will you be taking in Mandurah? do the sums.
Look at a few of the big blocks up for sale. prolly got an old house on them rent maybe $250 a week. you could hold one of those for a few years and then develop or flog as a development block.
Dont put a noose around your neck by buying this unit for the reasons you have posted.
There is so many properties for sale here. Look at little longer and think with a business mind not a holiday mind.
Read your post look at the word NEGATIVE. It should be screaming at you.

I live on the beach side of town now and love it. There is houses closer to the beach than me in really good nic, brick tile 810 sq mtrs 2 streets to the beach and they want low 400ks.
Re read Spidermans post. He,s a wise spider so take note of what he has said.
Ok theres my bit
good luck
cheers
yadreamin

ps Spiderman hope you enjoyed your visit to our very pretty liitle village.