When you buy blocks of units on one title it’s like buying property on sale



Dear fellow investors, 

I would like to share with you my story on 2 separate multi-unit purchases, 5 doors down from each other, purchased 8 years apart, and the rationale behind choosing these particular properties. Buying blocks of units on one title has played a significant role in helping me achieve my investment objectives over the last 13 years.  Let’s look at why it can be so powerful.

The Strategy:

In May 2004, I found a block of 4 2 bedroom units on one title in Sale Victoria. Over the next few years I set about separating the titles and on this particular property, completing some renovations. I love this strategy because it allows me to increase the value of the asset quite quickly which provides additional equity I can use to invest in the next project.

I purchased all 4 units for $245,000 in 2004 and spent around $100,000 completing the subdivision and renovation. Last year the units were valued by a bank at $620,000, which is an increase in value over 8 years of 153%, or 80% after allowing for subdivision and renovation costs.

Value Comparison:

To highlight the advantage of adding value to a property like this is to compare the 2004 project against what I have just purchased.
My recent purchase is an identical block of 4 units in the same street only 5 doors down. On this basis, it is fair to say that in 2004 it would have also been valued at around $245,000. In December 2012 I purchased this block for $392,000, so over the same period its value has increased by 60% – quite a difference from the figures mentioned before.

We can also compare the 2 blocks from a rental return point of view as well. The units purchased in 2004 receive a weekly rent of $180 each and the units purchased in 2012 receive a weekly rent of $160 each, a difference approx. 11%.  By making the property more appealing to tenants, results in a better cash flow for the investor.

Take a look at the numbers on my most recent purchase:

Purchase price: $392,000
Purchase costs: $23,000 – stamp duty, transfer fee, legal fees etc.
Total cost: $415,000
Annual rental income: $33,280
Interest per annum on $415,000 at 5.6% is $23,240
Other ongoing cost per annum, I allow 25% of my annual rent: $8,320 – council & water rates, insurance, agent fees etc.

Total income per annum: $33,280
Total cost per annum: $31,560
Total profit per annum: $1,720

This investment is genuinely cash flow positive from day 1.

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Back in 2000, Garry Harvey was a 26-year-old Victorian looking to buy his first home. Now, still shy of his 40th birthday, YIP’s runner-up for Investor of the Year 2012 has amassed a diverse portfolio of 39 properties that return more than $500,000 a year in rental income and have given him $2.75million in equity to work with. Garry is a fan of buying in bulk, and he has made the most of a strategy centred on subdividing blocks of units.

Top Suburbs : harris park , upper kedron , sth toowoomba , ferntree gully , melton

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  • Kathryn says on 06/06/2014 04:47:57 AM

    Hi Garry
    Thanks for your useful article. How did you go about locating these flats which were on a single title?

  • Michael SA says on 05/02/2015 09:11:38 AM

    I also have just completed a 4 unit build and sold 2 off the [plan to cover 95% off the build. I also had buyer pay community title and he chose to paint his units at his costs. This allowed me to sell units for less on paper reducing capital gains but if costs added to total I got what I wanted for units.
    Where is a good place to advertise units?
    I am building same project again selling off plan units for 220K each ( realestate value of 280k) this is a 60 k equity boost straight away.
    People are finding this hard to believe I think Im just in the wrong circle and no one has the cash or equity.

    Please help

  • Rob says on 06/02/2015 09:39:21 PM

    Where do u have these one pls mail me hindvds@me.com

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