Block of Units?

[KIMI]

Hello,

I am considering purchasing a block of 4 units in a not so desirable location ( Not the worst area either) in a not so large city but the yield looks good if I can get them tenanted and keep them tenanted. It looks like they may need some minor work just to clean them up and get them looking presentable. My question is for investors who have or have had block of units before do you think this is a good type of investment for a beginner like me? Does this type of investment have much more risks than just buying a neat and tidy house and renting it out or do you think the risk is worth the yield? Is there anything else I should be looking out for in this type of investment?

This looks like the perfect type of investment to really get me on that ladder as I only have one property right now but I am concerned that I may be too in experienced. Any advice, opionions or info would be greatly appreciated!

[Rosco]

Units are definitely harder as you have more tenants. But if you are newish, you can overcome this by using a good property manager.

What gross yield are you expecting based on 50 weeks?

If the units can give you a little surplus each year, then it does make your life easy, and allows you to put your personal money into paying of your own house loan or paying principal on the rental loan. Its then a compounding effect, the more you repay the more it reduces the interest and then the more surplus you have.

Take your time on the units, but I think it can really set you up well if done right

Ross

[Rosco]

Also property investment is still about the long term capital gain. So will these units go up in value at a reasonable rate? If not, why bother? You might make $1,000 to $5,000 per year, but without capital gain this isn't a lot for the risk

Ross

[flyernzl]

The definite answer is "it all depends . . ."

What are you trying the achieve?
If your aim is capital growth, the a stand-alone rental will probably give you better percentage growth than the block.
If you are after income, then a block of units will be better than a stand-alone house.
You need to decide your aim.

My peronal experience with my own block is that units require more time involvement than a stand-alone house., either from you or your PM. As a rule the tenants are more transient and you do get personality clashes between various tenants.

It is very well to say "property investment is still about the long term capital gain" but you do need to put bread and butter on the table today. If you starve to death in the short term then the long term is irrelevant.

My own goal is postive cash flow this week, so personally I'd go for the units.
Your own goal may well be different. Only you can decide.

[Glenn]

Ha. Good question. After years of looking after other peoples blocks of flats I bought a block yesterday. The previous low quality expensive property managers had let the place slip over the years. Rent below market, grounds in poor condition (that might have been more related to owners not wanting to spend any money) and the main issue one tenant is 9 weeks in arrears. So immediately I have maintenance issues and a tribunal case. I lodged that application today less than 24 hours after settlement. Nothing like hitting the ground running. The purchase price was $30,000 less than the vendors paid for it in 2008. I will tell you more in another post.