Advanced Investment Strategy: Purchasing multiple dwellings on one title
This is an opportunity for investors to buy an entire block of units.
These are common in different states, commonly in Sydney’s Eastern Suburbs. There is quite a lot of institutional money in these type of investments, with property trusts pooling capital from multiple parties purchasing these types of assets.
They are usually expensive, but come at a substantial discount to purchasing each unit individually. This discount is usually 20%+, but will depend on the area the units are being purchased.
Why is it attractive:
- Buying an entire block of units offers total control of the unit block. This reduces strata costs, negotiations with neighbours, etc. You have control over what can be done to the units over time.
- This allows scope to add value to the land over time. Unit blocks are usually on sizeable land contents, that may be re-developable over time. Individual units do not offer land content and do not have the potential for productivity improvements to the land over time (i.e. more dwellings on the land).
- These investments also offer scope to create equity relatively quickly by strata title each unit and selling off the unit development in parts.
- Rental yields are stronger by purchasing in bulk. The purchase price of the total unit development is usually 20-30% cheaper than purchasing each unit individually. This means a stronger rental yield, as the rental price of each dwelling isn’t impacted by whether the dwellings are strata titled or not.
Why is this unattractive:
- It is usually quite expensive to purchase this type of asset and involves large amounts of capital.
- Diversification risk. Spending large amounts of capital on an individual investment is risky for most. Therefore listed property trusts which pool capital are a common purchaser of these type of assets.
- Price for land value is quite high. That is, the build content usually makes up a large chunk of the overall value of the property.