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?
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.
Land tax for holding the property. Rates are based on the value of land held by the owner. So, three kids, three trusts would be ideal. Trusts have lower tax threshold if a beneficiary is not nominated. Whatever you do, please seek professional advice or call the State Revenue Office in your state for advice.
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.
All states have stamp duty - they were supposed to give it up when GST was introduced. Now they get 2 bites of the cherry.
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
It's a shemozzle
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.
Definitely stay away from apartments. Only land goes up in value really while buildings depreciate, and strata costs only go up and never down.
If you can't afford 3 green title blocks, try to buy 3 villas in the same group so you have the option later on to take full control and redevelop or resell to a developer as zoning changes etc. These will come with strata but once you have a majority share, you can take control of management and the costs. The catch is you need somewhere with high turnover otherwise you could be waiting 20+ years to get all 3 or 4 etc.
I’m seeing some decent builders’ offers
Does that also happen while you're awake though? /s
Serious answer: FWIW I'd stay away from apartments. I you really want to (e.g. you're worried about prices going higher) maybe buy a house they can share for a few years when they decide to move out.
I would invest instead in broad market ETFs.
What happens if all three apartments are affected by builders issues?
Set up a trust and buy properties with good capital growth prospects and make your kids equal beneficiaries. When the kids go to uni hopefully the income from the trust is large enough to cover the rent they need to pay in the location of their choice. Remember Uni is 3-5 years max and not all kids might not go to the same one.
Pls don’t take the fulfilling part of getting own mortgage away from the kids. Do help them buy their own but don’t buy them outright.
Off the plan apartments? Really just don't.
Yup. Oh that 3x3 study you saw and agreed to on the plans? Yeh we actually changed that to a 1.5 x 1 because we needed the extra room. Sorry not sorry.
As others have said, the business case for an inner city apartment rarely adds up. Given this is a lifestyle choice, that’s ok.
IMHO I would not buy off the plan. I know people who have lost their entire life savings with shoddy builds. You’ll probably be fine, however I have no confidence in the laws and bodies which should be there to protect you.
Off-the plan apartments in the city? That’s a big no for me.
Apartments don’t give you the gains you want, especially the typical 2-3 bedroom box style ones. Note - High-end apartments is a different topic.
Maybe off-the plan townhouses X 3 in the inner suburb would be better investment long term.
Will your kids be renting off you or are you gifting them the property?
as an ex-Melbourne Fitzroy-Carlton real estate salesperson it seems to me like Melbourne is a good time to buy with like $400K 2 bedroom units in places like Camberwell - a nice suburb (rather than $800K for similar in Sydney)
suggest do due diligence and avoid things like these mezzanine bed tiny (under 50sq.m. minimum size for bank loans) no kitchen (shared 'commercial kitchen - which nobody uses) - which one guy used his life savings super to pay cash for two units for his kids to study over the road at Sydney University - maybe $100-200K each - a bargain, right ? - only to find out the heritage awning replacement would cost like $40M - meaning said owner was now up for something like $80K in special levies he didn't have - as he'd invested all his spare cash in the purchase - for his kids … ? Eeek !
https://www.reddit.com/r/sydney/comments/v528rt/why_are_flat…
https://www.smh.com.au/property/news/sydney-apartment-invest…
not great idea. there's no tax advantage for a minor to hold property. OTP is fall of potential pitfalls, much more difficult to build equity through capital gain, and by the time your kids grow up it's hard to predict your/their circumstances at the time - they may very well go to a regional or interstate uni. much better to save up for them through a managed fund/ETF etc
Pick an apartment, look at the price today and 10 years ago.
Buildings don't appreciate in value, they depreciate. Land appreciates in value.
Buy land or buy shares in their name. It is relatively easy so setup a child's trust account through commsec, the fees for larger investments are high though. Another alternative is the Betashares app or the Vanguard app.
I am doing something similar for my 3 young kids, bought a big land in a good area and next to some top public schools in Melbourne. Currently rented out now. It's big enough to subdivide and build 3 4 bedroom townhouses in the future if they wish. They just need to pay for the house construction. The house will be worth a good amount 20 years later as well. Their kids' education sorted as well.
Maybe this is a better idea than buying apartments?
End of the day it's up to them if they want to live there.
Buying an apartment off the plan is a great way to lose money
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.