'Great-looking' buildings do not guarantee a good condition
Six months after buying his first property in Sydney, which was supposed to be his principal place of residence, Blake Roeleven encountered major defect issues and was essentially "forced to invest" on it to get tax write-offs while massive repairs and special levees are being done.
He has since refinanced the two-bedroom unit three times—bought in 2012 at $570,000 and now valued at $830,000.
While his story might sound like a happily ever after for many property investors, Blake has had to jump hurdles along the way, including a builder gone bust and some complicated strata issues that proved to be more than what meets the eye.
He shares his story with Smart Property Investment's Phil Tarrant and gives advice for investors who are looking into strata as the next big step in their investment journey:
Did you cop any costs associated with the repairs or maintenance?
Blake Roeleven: Absolutely, yeah. They hit me with a 30 grand special [levy] and I felt sorry for the guys in the penthouse... but [a] 30 grand special [levy]—hence, why it pushed me into keeping the property rented out. I'll claim the tax benefits and that's still going until today.
Is it a building defect? Is the building getting sued or is it something else?
Blake Roeleven: The builder's gone... It's pretty common. Loophole, so he's gone bust.
It sounds like a phoenix scheme...
Blake Roeleven: The thing is, it's really important to understand the way the strata budgets are managed, because now that I'm all over it, if you look at what the sinking funds were, what the proposed sinking funds and the 10-year maintenance plans [are], we were signing up for a… chaos. That's all being rectified under a new strata management.
What's the problem with the building?
Blake Roeleven: Water ingress. All the windows, they're facing the wrong way in terms of the flashings or something. I'm not too technical around it. Concrete cancer in the balconies.
On a 15, 16 year old building?
Blake Roeleven: Yeah, so it's just a whole heap of things. Electrical in the basement, [and the] plumbing. All [these] sort of stuff. It's about $1.2 mill[ion] with the repairs for the residential and then about [$]800,000 for the commercial... There is 32 residential. Probably about 15 commercial. Something like that.
You weren't aware of the issue before making the purchase? Did you pass the building inspection?
Blake Roeleven: Yeah, I did all of that. [I] Didn't find anything. Obviously it looked great. The building looked great.
How did the issues come to bed? Did someone just go, "Oh, something's not working"?
Blake Roeleven: Water ingress into some of the apartments. The paint bubbling on the wall and stuff like that.
What have you learned from this experience?
Blake Roeleven: I'll watch out for people buying units, particularly new ones. [You have to watch for] [t]he builders who have [a] good track record, [and] you've got to know what you're looking for in a strata of documents. I've learned the hard way, basically. Little bit funny about buying units from that—I [was] little bit burnt, but I either sold it and probably took a loss on it for the money from the purchase or I held onto it and got it rectified. There's a little bit of an emotional attachment to it, so I ended up keeping it.
Tune in to Blake Roeleven's episode in The Smart Property Investment Show to find out how he overcame the challenges of dealing with "shonky" tradesmen, as well as the steps he's taking to keep himself on track to achieve his goals.
More from this writer:
-
Why it’s still worth selling – even in lockdown
-
Over 200 Perth suburbs see winter price growth
-
Auction volumes on their way back up
-
Low interest rates drive record refinancing
-
Tassie’s own $20k HomeBuilder grant finds early success
-
Capital cities see stronger auction success
-
2020 vs 2021: How lockdowns have impacted the market