We live in a rural area but, as our three children age, they’ll probably want to head to the capital for uni and work opportunities.
Has anyone here bought a clutch of CBD apartments off-the-plan for their children’s future use? Our eldest is still a decade from any sort of independence but I’m seeing some decent builders’ offers. Ideally I’d buy three apartments next to each other.
Any thoughts or wisdom to share?
invest the funds in an ETF
That advice needs an AFSL to advise people to buy $100 of shares. Don't need that for $600k property!
As for real estate anyone can advise on it. Latest one on Instagram is one where you fiddle with your PAYG instalments to put it into your home loan to pay it off early. They'll charge you a big fat upfront fee for the advice. Crazy demand letters from ATO will come later.
I also like that guy who does finance podcasts and advise people to buy ETFs then launches an investment firm and calls himself Chief Investment Officer.
which podcast / investment firm is that?
There is a few of them you'll be able to find them.
I don't listen to them anymore as all they talk about is property or trading strategies that obviously under perform the index.
The hidden selling strategy. Basically you listen and think this makes sense then click on the many links to their associated 3rd party services from which they collect a fee.
@netjock: worst one I had was back in the early 2000's, I forget the name now but they were a paid share investment place and were quite good up until one day, sent out buy advise on multiple shares, the next day they sent out an ooops we forgot to tell you we bought them before advising you to buy them, don't worry though we have disposed of our interest in them as of this morning (obviously with a tidy profit from the pump and dump, reported them to ASIC and ditched their service)
@gromit: I agree.
The great stock picks and strategies that makes you money. It is so great we have to sell it to you as a subscription rather than just trading ourselves.
You know it is all over when it is advertise to the general public like Fulfilled by Amazon courses online.
Latest one is private credit. Some of these private credit funds are having to take over businesses (like Rockpool in Sydney) because businesses are defaulting. https://www.afr.com/property/commercial/private-credit-s-tim…
Worst ones will ones lending to developers / builders as the property market softens and some projects won't stack up. Lenders might lose a significant chunk because the project is half built and buyer needs to include the cost of bulldozing what is already on it.
Is this actually possible? To be salaried without tax withheld and to pay it all at the end of the financial year?
Google says you can't
Not anymore.
Not if you are employee of a company.
If you own your own business you can do a PAYG variation because you might be paying yourself dividends. Say for example you have $20k in rental income and ATO wants you to pay your $9k of income tax in installments you can vary the installment.
Still dangerous because ATO wants you to be within 5% otherwise they get really grumpy although technically by law you are not due to pay income tax until it is assessed and due.
The beauty of the deal is it is a marketing firm that will sell you the advice and have someone unregulated offshore show you how to do it and you're left holding the bag.
Your forgetting the power of leverage you get with property.
Using simple maths, use $100K deposit/equity to buy a $500K property.
Assume any negative cash flow years at the start are offset by the positive years later on.
Now assume that property will be worth $750K in 10 years time (erring on the safe side here) equals $350K in equity.
That works out to be almost 14% return p.a. on $100K.
Good luck finding an ETF that matches that over 10 years.
does the 14% p.a. include insurance, rates and maintenance?
he is assuming you can get 500k apartments in the CBDs
and assuming apartments will have the same growth as standalone houses with land and calling it "on the safe side".
look at 500k apartments sold in 2015 and check recent sales. they are not 750k. anywhere
People are weird with property. They literally subtract the sale price in today's dollars from the purchase price in yesteryear dollars with no accounting for inflation. Zero accounting for any expenses while owning the property or any buying or selling costs. For an apartment or townhouse they don't include strata fees either. It's really weird.
I think the point about leveraging is true - banks are willing to loan anyone 100s of thousands to buy property. They wouldn't necessarily do that to invest in ETFs.
@Tleyx: Yes I understand that but banks will give out mortgages much more readily to people with only $100k to their name because the loan is backed by the property itself.
The mortgagee defaults they can always repossess the property to recover their loss.
@lunchbox99: Dont banks give out different leverage to different people as well. This is standard practice
@Tleyx: yes you can get margin loans to buy stocks but mortages do not have margin calls when the value of your property declines.
@lunchbox99: What's weird is people that think rent stays the same over that holding period. Real property investors aim for cash neutral within 2 years.
Yes of course. Easy to be naysayer on a keyboard. Pull up excel and run the numbers.
have you actually checked some ETF performances in the past 10 years? doesnt look you have.
try
NDQ
VGS
IVV
just to name a few of the big ones….
Would have made bucket load in IVV and NDQ. VGS not as much.
I always tell people to get the latest vanguard investment report which shows 20 year performance.
And a lot less hassle!
Sure have you checked the performance of residential over the last 10 years? It's was a lot more than 50%……
I'd check the investment first.
Melbourne 2004 median price was $336k. 2024 median price is $850k (per Google AI response)
S&P500 ETF would have returned $220k per $10k invested (2024 vanguard investment report)
So your $60k deposit (roughly without stamp duty) in 2004 is worth $1.2m now with 20/20 hindsight. Best part is no land tax, no negative gearing, no mortgage brokers, no real estate agents, no tenants.
Do you really think a $335K house in Melbourne 2004 is worth only $850K right now? LOL
@abently: If you got better statistics please enlighten us all. This is not some guy at a BBQ who said they paid $300k for a weatherboard in Glen Waverley school zone and now it is worth $2m in unhabitable condition.
I call tell you and investment I made 100% return in 12 months but I can't repeat that every year all in and I can't go around saying to people "do you really think 45% last year was a good return?"
@netjock: Yes, but median price doesn't account for decreasing block sizes and urban sprawl.
I'm happy to be proven wrong though, feel free to post some examples?
@abently: If you don't get it then you don't get it.
Unless you got a better measure of the whole market to benchmark against.
Why do people benchmark their investment returns against the MSCI Global Index or S&P500 and not Tesla or Amazon?
You can pull as many examples to refute the averages but unless you are such a good property picker that you consistently outperform the market. Even the professionals (stock pickers working for investment firms) under shoot the market I'd really doubt that someone who is a part time property investor will consistently out perform the market trading properties.
@netjock: Lol, you have no idea….. even in Melbourne with the recent downturn, anything on a quarter acre block has practically doubled the last 10 years. That's a 30% y/y ROE.
Anyway, you obviously know everything so good luck to you. Peace out
@abently: I talk about 20 years and you decide to talk about 10 years.
I made 200% on a particular shares over 2 years does that mean I can say it will be the same over 10 and 20 years.
You don't get how comparatives work or how statistics work.
A lot assumptions lol…. Good luck finding an apartment that actually appreciates in price in 10 years.
This guy bought the property investment course so he trying to make the most of it.
If your strategy is so good keep it to yourself but I think most people here are just to pump the market because they have vested interest in it.
The problem with property is at the end. If you buy it for $300k and lets say it is worth $3m at retirement. You have $2.7m after CGT discount you need to pay tax on $1.35m with $1.15m at top marginal tax rate ($600k) so your $3m just turned into $2.4m then what do you do with the money? Put it into shares? This also including have to time the market. Dealing with bad property managers, tenants, maintenance, monthly repayments.
Where as if you have $3m in Australian shares you'd probably have $210k to live off in perpetuity (assuming 7% return dividends and cap gains). You can actually choose how much you take to adjust your tax rate.
There is a reason why Zuckerberg, Bezos, Gates and Buffett just didn't turn around at one point and said I'm just going to give up and invest in real estate.
Lol, if any of you read my other reply, you would have noticed I mentioned to avoid anything that isn't green title. I know you can't buy much for $500K, is was just a round number. The math still works the same if the property is 1 million with 20% deposit so long as you choose carefully. Good luck beating 5x leverage with any index fund.
Good on u.
All I got was school of hard knocks
So did I. I want better for my kids than I ever got.
Glad someone has this mindset.. I already have Aunties and Uncles doin the old 'no one wants to work these days' and 'they want a good paying job out of uni!' well yeah.. it wasn't free like it was for them at the time and an entry level job could still get them a house/land back then too lol. But for some reason this never sticks..
Good on you for wanting to set them up!
That said, I don't know if just buying 3 properties next to each other is the best idea? Some type of term deposit, fund, etc might be better? Maybe one will want to move overseas or something too.
Depending how old they are, might even be worth having a conversation with them about it
You cannot predict what your kids will want or where so its not a good idea from that point of view.
However assuming all goes well and the apartments go up in value, they will be a good investment.
Can always sell any property and use the equity to buy elsewhere as required
your kids now might like each other, but who knows what will happen in 10 years.. then what?
then they sell and retire at age 18.
Most likely they sell and smoke vapes and play video games the rest of their life in some bedsitter somewhere
Melbourne has an over supply of apartments. You can probably get a better return for your cash elsewhere in the mean time and purchase just a couple years before they need to move in for Uni. That way, your children can live in a newly built place or you might be able to get a cheaply priced apartment later.
Dont buy in South Melbourne or Docklands.
Don't know why you're getting downvoted, capital growth is dead for CBD apartments
Some people cant take the truth.
OzFascists pushing their own narrative!
capital growth is dead for CBD apartments
People who think they are buying them for capital growth needs their heads checked. Enough evidence they don't appreciate all that much because they can build more of it and you can't capitalise on your fractional ownership of the land.
Was in one block of 11 stories, like a 1990 office block converted into apartments. Problem is that it is sub scale (can't afford full time building manager / concierge etc). Explore what to do with the roof, can't really afford a roof top garden. Can't really sell the overhead space to a developer because they can't build another 50 stories on top unless they seriously deepen the foundations.
The building was solid like a tank. Owned it for 20 years and the original hot water unit still functioning. Some units still have their original stove ovens, toilets and bathroom fittings. Paid for itself and due to rent inflation made some capital gains.
Dont buy in South Melbourne or Docklands.
I share that opinion.
In Melbourne only buy within 1 block of the rectangle of Elizabeth, Swanston, Flinders and Franklin. Rest of the city is dead at night and nobody really wants to live in those areas, they are also over supplied.
Apartments are fantastic in theory but the way they're built these days is absolutely unacceptable, in Melbourne at least. Tiny bedrooms, thin walls, outrageous maintenance fees. Not worth it at all.
You're better off buying a 3-4 bedroom existing independent home in the burbs, rent it out till your oldest is ready to move in. Each kid can get a bedroom to themselves as they move out. Charge them a nominal rent if you're so inclined.
Recent situation: https://www.ozbargain.com.au/node/497347
It really depends on the area to be fair.
Some 1 bedroom apartments are the nicest homes in Melbourne I've ever been in and were built 3-5 years ago. You're not going to get much capital growth but (profanity) they're nice and spacious. Of course there's plenty of shit ones.
Similarly, many houses out in the burbs are shit and have many issues. They may appreciate more but dealing with shitty plumbing/electrical issues and cockroach infestations Etc. Isn't fun. Our friends just bought for 1 million in Melbourne suburbs and any times it rains their ground floor floods. (profanity) that.
Don't just blindly buy into all apartments bad, houses in suburb good bullshit.
Sounds like OP is looking for a centrally-located property for uni and work commute. Only 4 bedroom house you'll find for a not-insane price will be in random greenfield developments like Tarneit or Clyde.
OP is open to buying three apartments at once. Surely that’s more expensive than one landed house within 10k of parkville.
Misread. Okay, OP is playing in a whole different league if they can splash on 3 units, even off the plan.
Those apartments will be a decade old by the time they're used, would be outdated styles with old appliances.
You'll either have to rent them out and deal with the headache of being a landlord, and wearing out the apartments more as a result, or lose $$$ each year in body corporate and taxes.
Not all your kids will move to the city, and I'd hate to have an apartment next door to my siblings, independence means distance.
What will you do with those old apartments after your kids have grown out of them?
Seems like a huge headache for minimal benefit, invest that money and when your kids are of age offer to help them with a rent allowance that they can spend however they like.
That way each kid can prioritise what they want most, like would they prefer to live in a trendy area in an older/smaller apartment, or maybe they'd prefer to live in a shared town house with friends, or maybe they prioritise holidays and stay in a cheap place to save that allowance.
Makes them feel invested in their home, they chose it and are responsible for it, and teaches money management skills.
Those apartments will be a decade old by the time they're used, would be outdated styles with old appliances.
Styles don't date in 10 years, it usually takes about 20. Apartments built between 2005 and 2010 still look fairly modern, where as those built between 1990-2000 are clearly dated now.
In fact, some styles are fairly timeless and there is a bit of a movement in recent years to embrace timeless styles that have been popular essentially for 100 years and never seem to look dated, for example white shaker cabinet doors, subway tiles, farmhouse style ceramic sinks and traditional style chrome tapware.
They still become outdated, like white-on-white or industrial chic kitchens aren't out of style by any means, you wouldn't replace them for an update. But they are outdated and you wouldn't use those styles today if you wanted a 'new' looking kitchen.
The movement for 'timeless' styles has been around since at least the 80s, those timeless features still tie it to a specific period. Don't forget that stained glass was once considered timeless…
Time determines what is actually timeless, and not just in fashion at the time.
By timeless, I mean a design style that is universally pleasing to the human eye and mind (e.g. over centuries) beyond any trend or fashion of the time. For example, I think most people will agree gothic cathedrals will always be considered phenomenally beautiful, even if they're not practical as building designs. Similarly, shaker cabinets have been popular for 100 years, and will likely always be popular. There must be something about the style that appeals to the eye. Same with subway tiles, they have come back again and again and again. I'm not sure 1970s brutalist concrete cuboid designs (e.g. the kind that dominate Canberra's public buildings) will ever be considered timeless though.
Going off tangent, your parents are getting you an apartment.
As a reasonble person, the last thing you want to be doing is to complain about style when you get it right? XD
@Gongxifachai: Bold of you to assume teenagers are reasonable people (when their parents are concerned) ;)
wearing out the apartments, or lose $$$ each year in body corporate and taxes.
That's when depreciation and negative gearing come in to make it a good deal.
Apartments have jack all depreciation.
Old apartments - correct. First 5 years of a new apartment price is all depreciation as there's little land component.
@MITM: its a cliff
when it runs out of life youve gotta replace the whole thing and thats where you write off the residual value, whatever it may be
Agreed, there's no way to predict where exactly your kids will want to live, so keep things flexible. I'd invest the money, offer rental allowance and then when they are ready to buy give money towards the deposit.
I'd be personally weary of going near any new high rise buildings either way, been too much unchecked shoddy construction going on. Atleast buying into an older building you'd get some insight into whether the building is actually built to last and be able to look at what strata has been paying to maintain it. It's a real shame because more high rise is the solution to population growth, yet the Government seems more interested in just pushing it out as fast and cheap as possible to tick the box today, with little regard for the long term.
What's your definition of rural? I won't accept Gisborne or similar as an answer.
CBD is only good for Melbourne uni and that's not all it's cracked up to be anymore. Your kids might end up in Geelong or Burwood or interstate universities where living in the CBD is useless.
We’re well over 250km away. The city isn’t remotely commutable, no matter how many maglev monorails the government promises.
In tens years time you will be topping up the sinking fund constantly
Or just working for the strata company.
Even better is the strata committee gets captive to a few people and they institute all kinds of unreasonable rules.
More like within 3yrs the way build quality is these days.
Off the plan is not a great idea. Too many negatives.
Developer going broke or not finishing for many years.
Poor quality of construction.
Being delivered a smaller property than on the contract,
The list goes on.
Don't do it
Developers need a few off-the-plan/pre-sales to satisfy the bank loan. Sometimes good deals can be had.
I'm sure all those that bought off-the-plan at Mascot Towers and Opal Towers really think they got a good deal.
Or have a chat to the OTP purchasers of Ramsgate Park and see how they feel about their apartments being significantly smaller than the plans on the contract.
OTP purchases hand over the money and have no control over quality, build time or the final property that is handed over to the purchaser.
could you get a could deal? sure. But it is a lottery, so many things can and do go wrong even when the price is good and invariably the developer has weighted the contract in their favour and then at the end even if everything goes perfectly you have an apartment that will most likely depreciate significantly in the first few years.
Choose your developer wisely. Check the track record. As with any investment - due diligence. Some developers do actually produce good product.
Ideally I’d buy three apartments next to each other
That is concentration risk. Don't do it. Example. If the building has defects after it is finished then you have all your eggs in the one basket.
Other points.
Off the plan. What happens if you pay your deposit and the developer goes bust. Just happened recently in Melbourne. You end up as a creditor.
Assuming you are going to rent it out and you get the benefits of depreciation. If you have enough time to fully depreciate before you kids move in (there is the idea of renting it to them and doing the acrobatics for ATO) otherwise you lose it.
Apartments don't really appreciate all you get is yield. So basically after you drop the deposit someone else pays it for you. But that capital you're paying back as part of the loan is taxable income so you might still end up in a negative cashflow situation
Do your research (I think pre 2009 apartments are generally better built before there was the rush to build them) and put in your assumptions, finding someone with good maths and know their way around spreadsheet plus taxation would help. Most accountants don't know financial modelling, they just chase deductions for you.
What happens if you pay your deposit and the developer goes bust. Just happened recently in Melbourne. You end up as a creditor.
Just pointing out that deposits for off-the-plan units are usually held in agent or solicitor trust accounts, not by the developer directly. This means it shouldn't be a drama getting the deposit back if they go bust.
Not sure on the story in Melb, but I would run if an off-the-plan contract said the deposits were released to the developer prior to settlement.
Thoughtful, helpful replies. Thank you.
In addition to what others have said, Melbourne is a big city. The CBD is close to RMIT and Melb Uni, and ok for some other places like Swinburne, but would be almost useless if they needed to get out to Monash, Deakin or La Trobe every day.
If I was going to the trouble of moving out of home to study, I'd want to be within a few km of where I'm studying.
Check out if Melbourne has the same quality new multi story apartment buildings as Sydney has over the last 10 years then I would not buy off the plan.
Make sure you read up about changes to your off the shelf plan and sunset clauses so see if the builder can screw you after signing the contract as this seems to be one thig that occurs from time to time.
Make sure you check out the builder and construction company and any other company that if the quality is bad then the building will have problems or if the company goes belly up as has occurred to a number of construction/builders over the years that will also cause problems.
Great replies from everybody - thanks.
I was mainly interested in hearing from others who have done this. Obviously my Melb Uni-centric worldview is coming out, which fails to account for the excellent suburban alternatives.
Apartments aimed at students that were built in the last 20 years are crap. I lived in one, I had water running out of my light socket (which was apparently a regular occurrence).
Also to be specific, I wouldn't get a CBD apartment, living in the CBD sucks (particularly along the main areas, Flinders, Elizabeth, etc). I know a lot of people who do it for a few years then get out of there as soon as they can, or they have the money for a particularly nice apartment (in which case they live in Southbank). Getting a place with decent access, parking and amenities (even things like decent waste disposal, a fire system that doesn't result in weekly evacuations and enough elevators) is a pain.
IMO a less risky option to consider is buying property at the 10km ring. Then, if they want to rent in the CBD to be close to food and bars while renting out that property it's an option. Knowing your apartment will still be worth a lot in 10-20 years is more of a risk. The only thing going for it right now is there are very few new apartments being built - so if you know it will be built well then it could be a rare gem in a few years.
Why does living in Melbourne CBD suck? Noise or amenities or quality of the accommodation there?
living in Melbourne
There's your answer….
Rather than pampering them, I'd let them work at McDonalds and fight it out in share houses like the rest of the population. They'll probably end up more independent and resilient, and less likely to take things for granted.
“It’s for your own good!”
I heard that a lot growing up.
“It’s for your own good!”
I heard that a lot growing up.a clutch of CBD apartments off-the-plan for their children’s future use…. Ideally I’d buy three apartments next to each other.
In your case it seems that it may have been good advice - 3 kids and able to purchase 3 apartments in one go sounds like a success story.
If you'd been handed an apartment at university age would you have ended up where you are now? (some would grab the opportunity and run with it whilst others would see it as reason to idle along - are you sure which way your kids will end up?).
That’s a really good question. I don’t want to stuff a silver spoon into my kids’ gobs. On the other hand, I don’t want them to experience the joys of soup kitchens and homeless shelters - which is what I’ve had to live through.
A little struggle is good for the soul. A big one just grinds you down.
Put the money into gold &/or silver instead.
I own both gold and silver, but it's a small chunk of my portfolio. Why? They pay no interest and compared to the ASX200 or SP500 they are a miserable performer over the long term. And don't forget the costs to hold the precious metals.
Conspiracy theorists love precious metals because World Bank/Fiat/New World Order/ofF-thE-gRiD etc
Better than buying shoddily built apartments from companies that end up being wound up to avoid liability.
a clutch of CBD apartments
?
Really?
Is that the correct collective noun?
A clutch of apartments? Like a clutch of pearls?
I would have thought it was more like a hoarding of apartments…
BTW it sounds like a terrible investment and if you're going to be spending that sort of money and/or taking on that much debt you might want to consult a financial planner rather than random internet weirdos who get excited about $3 HDMI cables.
If you have that kind of money you could invest it elsewhere and then just rent them a place while they study in the city. Apartments in one city won't do them any good if they go to uni in another city.
Step 1: buy one and rent it out. After 3-4 years will have more money to…
Step 2: buy second, etc…
Also after each one you will have more info how the market is going and is it worth investing in properties. You can put in 3 ETF accounts and once kids want to go move out use their account as initial deposit.
Check good suburbs with metro/train,etc and good returns. No need to be very close to CBD but 10-20 km is acceptable.
I've only ever heard bad stories about OTP properties. Never heard someone say "yep it came in at the exact price we signed for, and on time, and certainly didn't go from a 2 bedroom to a study"
Well here's my OTP story. Paid $500 for a deposit bond - construction went overtime and was offered the sunset/get out clause which I declined. On settlement the building had appreciated 20% which the bank took as security and loaned me 80%. Had to put a few grand in for legals etc. Tenanted from day 1. Was a small 3 storey walk up of 12 units. This was a small local developer with a history and portfolio I could physically check out. He went on to build other developments in the area.
OP…
That's from someone who works in property and has almost 20yrs of strata/body corp experience from an owner's perspective (I've had to sort out ~$3mil worth of defects across all the body corps I've been in over the years… some I've taken the lead, others ).
If you want to give your kids a leg up, I personally would buy one existing property for your kids to live in during uni. You can then control how much rent they need to pay and balance their study to work ratio. If you have the money for 3 units, I would instead buy a house. Be sure to get a thorough building inspection when you buy… and get a builder who will check for defects, not just an inspector who does the basics.
I wouldn't gift kids a property… doesn't help them develop the commercial acumen to adequately survive in life.
Thanks. I really appreciate the insight/
Be sure to get a thorough building inspection when you buy… and get a builder who will check for defects, not just an inspector who does the basics.
Would you be willing to elaborate on this. If we're buying a property, how do we find a builder who can inspect instead of an inspector who would charge anywhere from 400 to 800.
I’m similarly curious. I always thought using the services of a reputable inspector such as Darbecca (Melbourne) would suffic.
invest the funds in an ETF and help them put in a deposit rather than handing them a property on a plate.