Apartment Buyer Type No 3: High Risk Investor

Summary:

The high risk category is where you are buying properties or apartments that no one else wants to buy. This is generally because they have issues, it could be earthquake issues or it could be leaky problems. These apartments are high-risk because there is a little uncertainty. You are not too sure how the Body Corporate is going to handle these.

It is an area which generally, the people who are purchasing do have a high level of knowledge, either in construction or construction industry. They have connections in the industry and they are able to see the value, which from the adding value point of view, for example, you get to have a leaky building.

TRANSCRIPTION:

My category number three is investor, high-risk. High-risk, high-reward is pretty obvious. But when you are looking at apartments; the high risk category is where you are buying properties or apartments that no one else wants to buy. This is generally because they have issues, it could be earthquake issues or it could be leaky problems. These apartments are high-risk because there is a little uncertainty. You are not too sure how the body-corporate is going to handle these.

A leaky building could get wound-up in court for years and nothing could get done. It means you cannot sell it. Or more issues could be found and a higher levy has to be paid.

It is an area which generally, the people who are purchasing do have a high level of knowledge, either in construction or construction industry. They have connections in the industry and they are able to see the value, which from the adding value point of view, for example, you get to have a leaky building, .

The problem is when you have a leaky building owners sell and they actually lose more money through fear, not through fact. For example, the cost to repair the complex is certain to a levy and that levy may cost - let us say $50,000. Now, the actual reduction in price will be more than $50,000. It could be doubled or it could be tripled.

That is where the purchaser will make his money, but that also comes with risk. What happens if that budget explodes? What if that 50 goes to 100?

I have got a client at the moment who wants to buy 30 of these high-risk properties. He has a lot of knowledge of the industry and has connections with the construction industry. I work with this buyer, who are looking at the properties and they are going to be re-clad - in the situations where they are leaky or there are other situations.

These apartments do not have the code of compliance anymore. And he is able to purchase, because the things with these kind of purchases is, you often cannot get finance from the banks. Therefore, you need to have a lot of equity. These are huge opportunities, but yes there is a risk. There is a place for it and if you have the ability to purchase, without needing to use the banks. It is a one where, I think is really unutilised. In regards of investors and the way they are looking at apartments in the CBD market.

I hope that helps. Cheers!