Today I’m going to make a case for investing in red-bricked boutique walk-up units. You’ve seen them before, they are built in the 70’s-80’s, maybe 3-4 storeys in height with dated interiors, and no lifts (hence the name walk-up).
Now before you go away and buy a brand spanking new apartment in Waterloo, Green Square, Olympic Park, etc I also want you to consider the not-so-obvious option, the red-bricks.
Before I delve into the advantages of investing in an older unit, the following would be my personal investment selection criteria (disclosure: I do not currently own an old unit, but would love to in the future):
- Proximity to transport and other amenities – This is a given for any type of property investments but the key is to be less than 750m walk from the train station (which is c.10 minutes walk)
- Boutique block – They often come in a pack of 4, 6, or 8 units. It could be more and could be less. But the less the better which I’ll explain why later on.
- Large corner block – The block of units is sitting on c.1,000 sqm or more on a prime corner site.
- No lifts and other unnecessary amenities like gyms that no one ever uses – This will guarantee a lower strata levy (unless something is wrong with the strata).
- Hopefully not renovated – This means you’re not paying a renovator’s premium which is usually costs + margin.
These are some of the major criteria that the investment needs to tick off and I see the advantages are as follows:
- Maximising potential capital upside – One of the reasons I love these older units is that if done right, you are sitting on top of a land goldmine which is yet to be unlocked by someone who can build to the highest and best use of the land.
- Maximising potential rental yield – Before the capital upside can be unlocked, these older units normally provide a higher rental yield (given the lower entry price). This is also because they generally have lower strata levies and other associated fees as well. You may also have to do a small cosmetic renovation before getting that rental yield.
I think the lower entry price point coupled with the potential for capital upside makes these units a good investment for a long term hold.