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?
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.
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!
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.
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.
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.
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.
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"
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.
If you are buying for your kids, few things to consider:
1. You kids may not want to live there.
2. Buy on trust for them, otherwise you will end up paying heavy land tax with all the properties combined, and pay stamp duties when you transfer it to them.
3. Place the properties in a testamentary trust, so that they follow your wishes and cannot be taken away in case of a relationship break down of your kids.
For 3 properties, would someone need to setup 3 trusts, one for each child?
Howcome there would be land tax? I thought it was only stamp duty when transferring to someone.
No land tax for apartments.. only strata
My 2c is theres no problems at all investing early for your kids, just because you suffered, doesn't mean the kids need to.
The Issue is if you're looking for upside or just purely want a place for the kids when they eventually move for uni/work. If it is the latter, then there's really not much else to consider than to pull the trigger…
Love the idea.
I would however recommend to at the very least buy apartments in different buildings even if they’re the same suburb.
1. Siblings might want some privacy when they’re older.
2. What if you buy all in one block and you get a mascot towers incident. Diversity would limit the damage.
If you buy in victoria, do not forget about stamp duty. Those towers etc would have high body corporate costs. i would buy interstate.
However in the long run the best idea is just to invest in ETFs and include a DRP. if you get cash divdend roll those in as well. If you do not want to do an ETF, Argo is good.
Personally, I tend to stay away from off-the-plan builds in general. And apartments are generally good for positive cash flow now not capital growth into the future which you are after.
I'd rather buy a freestanding house on a decent block of land in a leafy suburb instead of 3 apartments
Disadvantages:
1. Price fluctuations: The property market may decline before settlement, meaning the apartment could be worth less than what you agreed to pay.
Lower valuation: Lenders may value the completed property lower than the purchase price, requiring you to contribute more cash or struggle to secure a loan.
2. Delays in completion: Construction timelines can be extended due to unforeseen delays, impacting your plans
Developer insolvency: If the developer goes bankrupt, you may lose your deposit or face difficulties recovering funds.
Quality issues: The finished apartment may have defects or be of lower quality than expected, leading to costly repairs or disputes.
3. Unfavorable contract terms: Some contracts favour developers, allowing them to make material changes to design, finishes, or size without your approval.
Sunset clauses: Developers may have the right to cancel contracts under a sunset clause, often returning only your deposit while reselling at a higher price.
4. Loan uncertainty: Since settlement occurs years later, loan approvals aren’t guaranteed—interest rates may rise, or your financial situation may change.
Higher deposit requirements: Some lenders require larger deposits (e.g., 20-30%) for off-the-plan purchases.
5. Higher strata fees: New developments often have premium facilities (e.g., pools, gyms), leading to high ongoing maintenance fees.
Special levies: Unexpected building issues (e.g., structural defects, non-compliance with safety codes) may lead to extra costs for buyers.
6. Lack of inspection: You buy based on floor plans and renders, which may differ from the actual finished product.
Limited modification options: Customisation may be restricted, and changes could come at a premium.
7. High competition: If many investors sell or rent in the same building at once, rental yields and resale values may be lower than expected. That's why many lenders do not overexpose themselves by lending to borrowers investing in the same new apartment block.
Changing market demand: Future demand may be uncertain, especially in high-density areas with many new developments.
Thanks. Good points.
If u do get a Melbourne apartment, do yourself a favour and don't watch the the Melbourne property inspection guy on YouTube. If you value your sleep
OP it will be helpful to mention which city you're looking in and your budget. City apartments in Sydney are incredibly expensive and cost the same as a house.
Shares/ETF also aren't another bad option and in some ways can be preferred, as your kid may not want to live in the city you bought in or want to move overseas.
Most importantly, do not tell your child you're doing this for them until you're ready to gift them the asset As there's a possibility for your kid to be a drop kick and abuse your generosity or commit elder abuse etc.
Finally, also consider that they could be an inheritance tax in the next 10 - 20 years.
Good points. No, I certainly don’t want to raise a bunch of ungrateful dropkicks - but you never know how they’ll turn out, right?
I was considering Melbourne.
Three next to each other? What if building is a dud? Diversify.
invest the funds in an ETF and help them put in a deposit rather than handing them a property on a plate.