The PROPERTY DOCTORS, Sydney Australia Novak Properties
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The PROPERTY DOCTORS, Sydney Australia Novak Properties
EP. 1361 Bad Strata You Were Warned but Worth It
Unlock the secret to transforming problematic strata properties into profitable investments with insights from rising real estate star Josh Wapshott. Learn how to navigate the world of high strata costs and complex repair issues, turning what seems like a money pit into a goldmine. Discover how properties burdened with fire upgrades, waterproofing failures, and concrete spalling can offer incredible opportunities for savvy buyers willing to embrace short-term challenges for long-term financial gain. Gain a deeper understanding of the dynamics of collective ownership and the power of fair negotiations, setting the stage for increased property value once issues are resolved.
Explore the potential in properties often overlooked by others, and learn how to see beyond negative building reports to uncover diamonds in the rough. Josh helps us decode the compliance maze that turns quick fixes into complicated projects, and how these challenges can actually lead to significant discounts on property prices. With practical advice on market comparisons and strategic purchasing, this episode encourages buyers to capitalize on the slingshot effect of resolving strata issues, turning immediate cost burdens into future profits. Embrace the unexpected opportunities in real estate, and find the silver lining in even the most daunting situations.
okay, here's the deal you're buying a unit, you love it, you've negotiated price and you're doing your research on the property. And bad news, it's a terrible strata and strata search. What to do next? We're gonna give you some big money-making advice. Ah, mr Expert Real Estate Agent, josh Wapshot Good, good morning.
Speaker 1:How are you, mr novak? Good morning, very good, very good, very good. Ladies and gentlemen, josh is uh, is is uh one of the one of the great new agents at novak and boy has he been tearing it up um since he started with us and wanted to have you on this morning to talk about your experience with these. Been tearing it up um since he started with us, and I wanted to have you on this morning to talk about your experience with these stratas because it's um, it would be pretty foreign for you, um to see some of these bad stratas, but they are out there. But what people wanted to share with what people? What you see people do when they, when they get a bad strata, so they're buying that, they're buying the property and they're in love and you know that looks good on the outside and looks good on the inside and the price is right, the location's good, but what happens?
Speaker 2:tell me more well, yeah, very, um, it is one of those things that sometimes can throw a spanner in the works, but what I like to describe it as a bit of short-term pain for long-term gain, and what I mean by that is essentially these properties most of the time are priced with having whatever issues there may be wrong with the property.
Speaker 2:So I find it as a bit of an opportunity for buyers to look at this more of a positive light than negative. I think what really drives price in any market is your old demand and supply and I think with a lot of these strata buildings or whether it be a warehouse, whether it be a unit, what you find obviously is that that strata issue then lowers that demand for quite a large sum and less buyers to compete with. So a lot of the time people are shy away from these sort of scenarios, but you actually find that the strata costs that you'll incur over the next whether it be six months, 24 months, the cost you incur there you'll find that you're actually buying the property with taking that into account and even more so. So, yeah, it's a great opportunity to actually walk into a property. Yes, a bit of short-term pain with some high strata rates. But once that's all said and done and that report's updated, well, that property is going to recover greatly in regards to value once those issues are sorted. What have you seen, mark?
Speaker 1:Yeah, look, I think people got it. There's a couple of pieces to this and I love the saying equity comes with clean hands. When you own 10 units and when there's 10 units and there's 10 different owners and the units are worth that in dy there are two, but a million dollars each, then there's 10 million dollars worth of uh, worth of equity. These people act in a manner because there's equity, they they act with clean hands, they act in a manner that's that's fair, equitable. They act in a manner that's that's reason reasonable. They they negotiate correctly. They can stuff fixed, they get stuff done. My point is they get, they get. They get there, they get the repair done at what the cost is. Now people may be sitting here like what the hell does bad strata mean? Like, what does bad strata look like? Well, josh, give us some examples.
Speaker 2:We've got, you know, plenty of examples. Would be like replacing the cladding, the fireproof cladding on the front. I know we've got one of those down on Pacific. You know, you've got, obviously, your water issues. You know, as buildings age, you're going to get Fire upgrades. Yeah, there's plenty.
Speaker 1:They need a fire upgrade.
Speaker 2:Yeah, exactly right I mean, there's quite a few.
Speaker 1:What other ones do you see? Concrete spalling Cancer?
Speaker 2:Yeah yeah, you're on concrete Water Obviously water being a big one.
Speaker 1:Yeah, the classics water, so waterproofing failure. So you know it's where there's a. Sometimes there's a deck on top of the building that fails and water seeps through units below. Now when you start reading up on Estrada as a buyer and you're looking at this and you're a first-home buyer, you're like what the hell is happening in this building? I would rather just go and buy another building that doesn't have any problems. I'll go down the rabbit hole a little bit, because people must be thinking to themselves how has this happened so much in society today and why wasn't this happening in the 80s and 90s? You know, because some of these buildings are a lot of these buildings that we're selling at dy, 60 years old, six zero. So they're pretty old and they're rock solid. They're built well and I'll tell you why. Class two building, two words, um. I used to get, for example, the.
Speaker 1:I remember this classic crack on a building that we had in Freshwater that we're selling. It was a property that I owned and Luigi came out. Luigi looked at the crack in the corner, going from you know, crack was about the ground gave way a little bit and um, and it cracked, so cracked the brickwork. So luigi would come out and go, as it's about a week's work. Uh, there you go, mate. Mate, how long have you been bricklaying? For 40 years, you sure you've got the capacity, no problems. How long will it take? A week and a half. So he comes out by himself, you know, puts some props up and, you know, takes the bricks out, puts the bricks back and it comes back, done Fast track, 15 years. You know, takes the bricks out, puts the bricks back and it comes back, done Fast track, 15 years.
Speaker 1:Luigi comes out. He says, you know, and you ask him the same question he's been doing it a long time, he can do it. And he says, oh, I can't do this. What do you mean? He goes oh, I need to get you know the correct equipment. I need to get you know where's your insurance, luigi. Here's my insurance. I need to get this, I need to get that, I need to get this approval, I need to get that approval. Okay, fast forward another 10 years. You see Luigi go.
Speaker 1:Luigi, still, what you still were doing bricklaying is yes, but I don't work for myself anymore. Why, it was too hard. And the and you go. What do you mean? He goes. Well, you know, every time I have to do a job like this, engineering reports that report, this report, that reports council, blah blah strata, blah, blah, blah blah insurance. So the job that luigi would have charged five grand for three grand for 25 years ago is now 250 grand. It's going through a big building company. It's a process that takes a hell of a lot of time. So with bad stratas, the reason it's being more being they're often bad is the level of compliance is disgusting or beautiful, depending on who you ask, but it's become a laborious and not a quick fix. So fire upgrades you know those essential items were not essential 25 years ago. Bang, there's the cost. You know waterproofing the guy, the one-man band, used to come and fix your waterproofing and to get stuff done. Bang, that's gone.
Speaker 2:Yeah, exactly right. Yeah, there has been a big change in that area over time. But, yeah, I definitely think that you're right in saying that you know it's to be looked at as more of an opportunity, I think sometimes, and it's just about taking the cards you dealt and making it work for you. I think that I've seen a few properties on there, even a warehouse that we have that needs quite a bit of work. But when you look at what you're getting for your money, I mean you know you're probably looking at, you know sort of levies you'd be looking at anywhere between 30, 40 grand. But if you compare the square metre rate and what you're getting for the building, you're probably saving 80 here on something that you'd buy somewhere else. Okay, yeah.
Speaker 1:So here's the silver lining. You've just said it. Can you say that one again? This is the whole reason. If you can buy, well in a strata, you should buy. This is the silver lining of of a bad strata over to you, yeah.
Speaker 2:so I think that's just what we find a lot of the time is the strata cost that you're going to be up front for or what's good. What it's going to cost you is going to be less than the discount you're going to be getting on market for comparables, and I think that's the big ticker there. So, obviously, whether it be a warehouse or whether it be a unit house, I find that being that buyer that's ready to move on a property such as that is in your favour as the buyer as opposed to the vendor, and what you'll find is the saving you'll make on market for a comparable property will be more so than the amount you spend on that extra strata, and that's what I think people…. So if you can buy for $100,000 less.
Speaker 2:There's big opportunities in there because, yeah, the first thing they do, like any buyer they look at the report and they go, wow, I'm out of here. But take that research that step further. Like anything, you're taking into comparison the condition and then obviously the price. So what I would do is not just stop at that report, like anything. You're taking into comparison the condition and then obviously the price. So what I would do is not just stop at that report, take that report, take that information in obviously everyone's level of risk is different but then start popping that that comparable price to other other properties on the market and what you'll find there is what you're up for in terms of strata will be less than if you were to buy the same property or the same type of property next door. Um, so I think there's a big big, and that's why I say years.
Speaker 1:John panel b has been doing it for years.
Speaker 2:Exactly right, I've been doing it for years, exactly right, and I think it's just for people to wonder the panel.
Speaker 1:The panel beater buys the car damaged that no one else wants to buy, but buys so goddamn cheap, does the quick fix or and the good fix and sells it for a huge profit.
Speaker 2:It's possible to do that with bad stratas yeah, and, and I think that the perfect that's a perfect analogy of what you put there, mark, and I think the other thing as well is it's not like there is no going around corners with these things as well. You know you you've most likely a lot of the time engaged a professional strata company that you know will be going over these reports independently. So I feel that, as if you're buying in work's done, you know it's complete, you know what's done properly. This is then uploaded to the report for the next lot of buyers. So the next time this property comes on the market, oh wow, it did have this, this and this, but that's all fixed. Now it's basically almost brand new, and that's the way that your next your next buyer is going to.
Speaker 1:Can you give me, can you give me an example of a real property where that's happened that you've witnessed recently?
Speaker 2:Yeah, there's probably more of a warehouse one I've got where it's a relatively new build over at Villiers Relatively new build. There's a few minor things I'll need to fix up, but what you're getting for that warehouse in terms of size, fixtures, fittings, what it offers you, I would say you know, if that's squeaky clean, you're probably getting an extra $200,000 on market for that sort of warehouse in that location Potentially potentially. Potentially yeah.
Speaker 1:So that example there, you believe, because of the strata situation, it's being discounted and you believe when that strata is fixed, boy, it will be fixed. Coming out the end, it may take years, it may take years, may take years, but when you come out the other end, um, you're going to be slingshotting the price. You know you're going to be slingshotting the price and and the good news is that you're buying for less and you're actually within your lot, you're not affected. So these guys are going to be, you know, the lucky buyer is going to be using it, is going to be renting it unaffected or occupying it unaffected, um, and then getting this, this, this discount, built in. So there you go. Hopefully that illustrates to people bad strata, yeah, and what a bargain it can be.
Speaker 2:Yeah, yeah, it's an opportunity, guys, not always something bad to look at. So I'd just say look beyond the report and do your comparables on market and with a good real estate agent that's possible. So let us help you and we'll make it easy for you. Boom Thanks, mr.
Speaker 1:Wapshot.
Speaker 2:Thank you, Mr Novak.
Speaker 1:See you guys. Well done, novak Djokovic.