Why I Don't Recommend Buying an Apartment

Don’t Buy Apartments
G’day everybody. I’ve had a question. Why don’t I recommend apartments?
There’s a very good reason why I don’t recommend apartments. Including myself, personally, being stung by it.
When you buy an apartment, you have to buy off the plan. So, the way that works is the property developer comes along and they find a block of land. And they might want to build a complex of, say three hundred apartments. To do that, what they have to do is they have to go and sell about a third, probably 50% now, of those apartments “off the plan”.
So, what they do is they go and get a graphic artist and an architect and they’ll put together some glossy brochures to explain how the property is going to look and then they’ll go and get some salespeople to sell the apartments off the plan.
You as a would-be investor come in and you look at the apartment, you look at all the glossy brochures, you think “wonderful!”. You put down the 10% deposit and you sign an unconditional contract to buy that property in 18-24 months’ time when the construction is complete.
Now, here’s the problem with that. The first problem is this. At the time, you make your decision to buy, the market is in a certain point. Usually the rental yields are high in that area and there’s good pricing in that area, hence why they’re building a development there in the first place, because they know that they can add two or three hundred apartments to the market and theoretically be able to sell them.
So, on paper, at the time, looks really good. But in two years’ time when it comes online, it’s actually far from that.
What actually happens is those apartments all come on the market at the same time. Whilst half of them might be owned by owner-occupiers, the other half are owned by investors.
And what do all those investors do? Straight away, want to rent their property out. So, when that apartment building is finished, all of those apartments, including yours, will come on the market at the same time for rent.
So, that high rent you thought you were going to get two years ago, could drop dramatically because the market gets flooded with available rental stock and they have to drop rents in order to encourage people to go in there.
So, once that happens, the next thing to follow is prices. And what happens is, the people who would be investing then they get the rent they think they can and they realise that they actually can’t hold the property, so they immediately try and sell. And when they try and sell, the market gets flooded with sales and the prices drop again.
So, this can then be amplified in some cases, like we’re seeing in Brisbane right now, where there is something like twenty residential towers being built in Brisbane. All these residential towers were marketed and sold over two years ago now, about one to two years ago.
And at that time, there was very good numbers in terms of valuations and rent returns. So, they were all sold on that promise. But what’s happening now is they’re coming online and the banks, people are going to get their finance to settle on the property, and the banks are valuing the property for less than what they signed the contract for.
And because they signed the contract, they have to buy it at that price. So, we’ve got a whole heap of people who can’t get the finance and they’re losing their 10% deposit.
Other people who have to go and top the finance up because they got approved to buy it… the banks valued it at the new price – might be fifty to a hundred grand less – so they have to go and borrow that money, but then find the rest of the money from somewhere else because they must buy the higher price if they sign the contract on it.
Apartments can be really dangerous. In boom times, people, if you know what you’re doing, and you’re a seasoned investor, you can make some money on apartments, but generally, you should stay the hell away from apartments because they’re bad news.
That’s it from me today.
Cheers.

[michaelzma]

This video is all based on the assumption that a person is buying an apartment that hasn't been developed yet

[mackturbo]

Guys, This guy clearly has no idea. Please don't take a single word in.

[davidyuwa]

This guy clearly is speaking about one experience in his tiny little world. Can't apply to all investment.

[purplegoldfish]

buying a apartment *if u plan on livin in or around said place or comute* will generaly save u more depending on standards and if u did ur job properly on know about said location just imo

[doug]

if you buy offplan then it can go up or down, usually though prices go up. if your block affects rents in an area it is huge and this is issue with many off-plan not flats generally

[istiklalcaddesi]

Title should be off the plan. We all know your business plan isnt suitable for anything but freestanding houses. Maybe just tell people that in 30 second video

[blessingtshego]

I'm glad I watched this. Thank you💙

[PYYYYYY]

What if the construction doesn’t take place or delayed?

[dr.vannostrand]

what if you're buying an established apartment built pre-2000?

[ahmedswork]

But what about buying an apartment in full to live in and not for investment purposes.

[johnnash]

I bought an apartment for $1, 025, 000 in cash.. big mistake to get my money all tied up

[lamujerexitosa]

All this YouTube videos are just about 2 to some units apartments. I just want to buy my first 1 or 2 bedroom apartment and need help with that!

[eng.knowledgeseeker]

investing in apartment is the best way to make profit

[TVegaC]

and is also good that investors don't get their money into apartments or any housing for the matter because they alter housing prices for people that actually need a place to live

[mushy]

"You have to buy off the plan" um. No

[THEBIGGESTSCUMBAG]

SUBBED CAUSE YOU'RE AN AUSSIE ALSO

[IntegrityPropertyEducation]

Hi everyone,

Thanks for watching our video! If you'd like to watch the full webinar, you can do so at our website -

Cheers, Daimien