What a transformation!

2So in September of 2013 I published a post talking about the difference between Company Title and Strata Title. The example that I used to illustrate this was a one bedroom apartment located in Potts Point in Sydney. This time capsule of a property had been boarded up for over 20 years and was in largely original condition. Whilst that post was talking about the restrictions that may be in place with Company Title, today’s post is quite different. The apartment itself was snapped up quickly (for a value of around $435,000) and someone’s been pretty busy over the last 8 months!

By the looks of the sales pictures the unit was taken back to its bare bones and given a new lease on life. With only 53 sq m to work with it’s a pretty small canvas but what a result! Who would have thought that in less than a year the same place would be showcased with descriptions such as beautiful polished hardwood floors, a streamlined Caesar Stone kitchen with integrated stainless steel appliances and a stylish designer over-sized bathroom (over-sized for 53 sq m I’m guessing). They even managed to squeeze in a concealed laundry.

As with the first sale it came on to the market and was under offer in no time, this time at $610,000! Click here to see the agent’s listing. Although I’m not a professional renovator I think we can safely guess that the renovation itself would not have cost $175,000 so there is a tidy profit in store for this savvy flipper. The catch with this property though is that it still falls under company title so landlords looking for a good investment would have no luck as leasing is not permitted in the building. I’m guessing that it will make a nice pied-à-terre for an executive on the move! Check out some of the before and after images below.

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Company Title vs. Strata Title

When looking to purchase property it can sometimes feel like you have to start learning a new language and it’s not that far from the truth. There are a lot of terms that you need to learn about and start to understand what they mean. As frustrating as this can be, it’s crucial to make sure that you can speak at least some of the language of real estate to ensure that you have a good idea of what you’re getting in to and that you can avoid being bamboozled by agents talking the talk. One term that you will hear a lot, mainly when there are multiple dwellings in a group (units, apartments etc) is Strata Title. Another one that you may hear less often is Company Title. Let’s look at this fascinating unit recently for sale that highlights the difference between Strata and Company Title.

PP1

This one bedroom apartment recently listed (and already under offer) in Sydney’s beautiful Potts Point has been shut up for the last 20 years and has not been lived in for all of that time. 20 years ago similar units to this were selling for around $75,000, in 2013 however it’s priced at more than $436,000, not surprising at all when you can get views of the Opera House and Harbour Bridge from the common roof terrace! It’s certainly a unique offering which hit the news quickly and looks like it’s been snapped up just as quickly.

PP2

The interesting thing about this apartment though is that it’s listed as Company Title not the more common Strata Title. With strata title schemes they are divided into lots and common property. The feature of strata title is that each lot will come with it’s own title deed that can usually be bought, sold and mortgaged without any consent being needed from other lot owners or the building management. The owners also have an entitlement and relevant obligation for the use, maintenance and upkeep of the remaining common area outside of the individually owned lots (ie: driveways, paths, gardens, stairwells etc). Strata title was instigated by property developers in the 1960’s, prior to this, company title was a common method of ‘ownership’ in apartment and unit complexes.

A lot of company title complexes were set up in the 1920’s and 30’s and it’s not a surprise for the property above that was built in 1929. The difference with this title however is significant. Company title allows people to buy shares in the company that owns the building and the ownership of those shares allows the person to live in the unit. The large difference is that the purchaser will not receive any certificate of title for the property. There are also often restrictions on any subsequent leasing of the property and also the prospective owner may need to be approved by the company board of directors. Some lenders are also reluctant to lend as much for a company title property so it’s important to take this into consideration. If you hunt around there is a lot of useful information on the differences in property titles. This article gives a useful overview of the pros and cons related to company title. If you know of other useful resources, post them below!

China’s amazing ghost cities

ChinaOne of the most fascinating things that I’ve seen in the media recently regarding property development are the incredible ‘ghost cities’ that are being developed in China. The first I heard of this was in 2011 when Journalist Adrian Brown of the Australian Dateline program visited multiple new cities that had been built throughout China. The statistics are incredible with reports stating that there are over 64 million apartments vacant across the country. The background to why these cities have been built is intriguing and somewhat complicated. Many experts theorise that it has a lot to do with China’s tax policy. With no local property taxes, governments still need to make money so this is largely done through the development of land. With land sales being illegal in China this works by the government leasing large tracts of land for development of these massive estates, the scary thing is that this happens sometimes regardless of other services and infrastructure being there to support such large cities. Throw into this mix the emerging Chinese middle class with excellent savings records and a non-transparent stock market and investment in property is an attractive option for many, either as an investment for themselves or as a future home for a child. It’s reported that many people purchase their property with cash, and with no mortgage or property taxes to worry about it could be seen as a relatively easy investment to sit on. The results of this are evident however, just take some time and view the following footage, it’s astounding.

The first report is the original from 2011 whilst the second is a follow-up that was broadcast recently in 2013. The third report from 60 minutes Australia gives a slightly different view on the development of China from the perspective of an Australian architect employed to work on the redevelopment projects. The final clip from 60 minutes US is also really interesting. I find the entire thing absolutely amazing and I’m continuing to find more and more information regarding this unique situation an entire country finds itself in. I’ll be fascinated to see how this develops over the next 5, 10 or 20 years.

Looking around LA

I think I’d find it almost impossible to come to LA and be surrounded by so much real estate without getting out for a bit of a look. So today in sunny West Hollywood I consulted Google Maps and off I went. Whilst I would have loved to have gone up into the hills to stroll through mansions my lack of car (and multiple millions of dollars) kept me local. I selected 2 properties to view, one on the ‘If I won lotto list’ and the other was on the ‘this could be doable one day’ list. Let’s start with the home that would use up my lotto winnings.

Described as a Stunning 3 bed, 3.5 bath town home with superb finishes located near the famous and trendy Melrose Place, I’d certainly be thrilled to call this place home. At just under 1.5 million it’s not cheap, but for the location in West Hollywood and the amazing property I’d be thinking this is good value. Huge bedrooms, great bathrooms and a large outdoor area help finish off the 1 year old 2250sq foot 2 level condo.

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Although the agent was assuring me that the US property market is well on the rebound I had the luxury of looking through this amazing property by myself for almost 45 minutes. I get the feeling that the level of confidence in the local property market may not be quite as positive as he indicated, or maybe all of the movie stars were off filming today. So I then packed up my bags and headed west to the other end of West Hollywood, literally the other side of the street to Beverley Hills.

This cute bungalow below is situated in an area known as the Norma Triangle and was built in 1922. This was the more realistic property I wanted to inspect, with 2 beds and 1 bath it is quoted at $787,000. OK, maybe not amazingly cheap but half the price of the previous one…and it comes with your own recording studio (formerly known as a garage). It had a completely different feel to the other property being much more homely. A fantastic hedge rose 10 feet as your front fence which appears very common in LA and looks great. There was also a nice backyard to relax in after your exhausting recording sessions. I’ve asked both of the agents to get back to me with what their rental estimates would be, I’ll be interested to see what percentage return you get.

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I’d always recommend having a look at properties in other countries if you get a chance whilst travelling. I find it not only very useful to get an idea of what you can get for your money but also fascinating to see how others live!

A word about rental guarantees

dt_off-the-plan_729-20121026154649765420-620x349There is an interesting article featured in The Age today looking at the potential pitfalls of rental guarantees for apartments purchased off the plan. Click here for the article. Melbourne has been in a boom time when it comes to the construction of new apartments (just look at Docklands over the last 10 years) and the article highlights that there are 25000 new units coming on the market in Melbourne in the next 12 months. What it importantly points out though is what can potentially happen to investors that purchase with a rental guarantee which is above the going market rent for the area and then the guarantee period expires leaving the investor with sometimes an enormous gap between their income and expenses.

It’s these sorts of ‘incentives’ that investors need to be aware of. OK, they may work in your favor if the time and the place is right but it’s important to ask yourself the question ‘why is this being offered?’. Always follow the dollar! (Some useful advice I was given years ago and it hasn’t failed me yet!). Interestingly the author highlights that people may find themselves ending up buying a financial product rather than a piece of real estate. Check it out and make up your own mind here.