1970’s units rock
Real Estate Talk
Kevin Turner's Podcast with Michael Yardney
20 September 2016
Michael Yardney reveals why 1970's apartments rock in his opinion. Is
it the architecture, where they are located or is he just reminiscing
about his youth? He gives us five reasons he likes them.
Kevin: As more and more people are deciding to trade up their
back yards for balconies – that is, move into units and apartments –
we’re seeing an increase in the popularity of this type of purchase,
but what do you do? Do you go and buy one of those older ones, which
quite frankly I love, because they have extra space in them, or are you
going to look at one of the newer units?
Michael Yardney from Metropole Property Strategists is having a talk to
me right now about the reasons why you might just want to have a look
at some of those 1970's apartments.
Kevin: Yes, I love those older ones. They give you so much
flexibility, don’t they? I’ve actually seen people turn their laundries
– because they had quite big laundries – into an en-suite to add extra
Sometimes they’re a bit ugly from the outside
Michael: There are lots of reasons why ’70s apartments rock.
Sometimes they’re a bit ugly from the outside, if we’re talking about
the ’60s and ’70s. If you go back a little bit further, if you go back
a little bit further, if you’re looking at established apartments,
particularly in Melbourne and Sydney, they built them in an art deco
style and they really have character, as well. So yes, I see lots of
reasons to consider buying an established apartment rather than the
ones that are new or a couple of years old.
Kevin: Is it just my imagination, Michael, or are those ones from the ’60s and ’70s a bit bigger?
Michael: They are. The town planning regulations were different,
the way we were living was different. They didn’t squeeze as many on
the block, so therefore, in general, the sizes of them are in the 70 to
80 square meters for a two-bedroom apartment, where often now it’s 55
to 65 square meters. It’s not just that, Kevin; it’s also how they used
the space. They had corridors, they had an entrance hall. You didn’t
walk straight in and fall over your lounge suite, so I like the floor
plan of a lot of them, as well.
Kevin: Yes, and they had the balconies, as well. Some of the new
units simply don’t, or they just have those Juliette ones that you
can’t really use, anyway.
Michael: That’s right. I think another great thing about the
established apartments is their location. In our major capital cities
in the ’60s and ’70s, they were building these in the suburbs, and
often within five to seven kilometers of the Central Business District
(CBD). Today, we are also building them, but they’re usually on main
roads or they’re in the CBD. So I think their location within the
suburbs – and those nice, gentrifying suburbs – are good also.
If you think about it, a lot of them that were built in those days,
they were called flats, and they’re what I’d be distinguishing as a
flat from what we now call apartments. Those were built, I guess, in
general for tenants, but now, most of them are being bought up by
investors or owner-occupiers wanting to live there because of the
location and because of the size.
Kevin: And they’re still very affordable, too, even though
they’re in, as you said, some of those now highly desirable areas.
buying below intrinsic value
Michael: If you do a price per square meter, you usually find
that you couldn’t replace the building at the cost you’re buying
established properties, and that’s what I call buying below intrinsic
value, below replacement value, which doesn’t really occur when you’re
buying the new apartments. So you actually get really good bang for
your buck buying established apartments, Kevin.
Kevin: A bit of history comes with them, too, doesn’t it? They have really good bones.
they’re not built with papier mâché
Michael: Yes, they do. first of all, they have good bones because
they’re not built with papier mâché. Now, I’m saying that
sarcastically, but when you have a look at the way some of the new ones
are being built, they’re not as solid, but the other thing is they have
a history of resale values, so you can see how the property has
performed over the years. Has it kept going up in value? Have there
been problems with the owners’ corporation? Are there disputes within
When you’re buying a new property, you don’t have that history; you’re
buying it based on what the developer has put on his sale price list,
his schedule, rather than the resale values of established apartments,
which in my mind, is a better way of putting a value on a property.
Kevin: Yes, Michael, and you made the point earlier, too, that
these flats – as we used to call them – were built for tenants, but
now, more and more people are coming and finding these that they can
not so much turn them over, but add their extra bit to them, and become
and owner-occupier, so the mix is much better, isn’t it?
these ugly ducklings are ready to be improved
Michael: There is definitely. There’s no doubt about it. The
other thing that you mentioned is they can add their own bit to it.
That’s one of the things I like. One of my strands of my five-stranded
strategic approach is adding value. A lot of these ugly ducklings are
ready to be improved, and improving the kitchens and bathrooms, which
is the main area that sells the property and increases the value.
That’s pretty easy to do.
I’m not suggesting you do structural renovations. They’re actually
difficult, and often unable to be done, because your ceiling is
somebody else’s floor, your wall is somebody else’s, so you won’t
necessarily be able to knock out walls. But the comment you made a
while ago about changing the laundry into an en-suite or changing a
sunroom into another bedroom, you can reconfigure things and you can
improve them, manufacturing some capital growth. You can’t do that with
newer apartments, Kevin.
Kevin: So there you go. Next time you drive around one of those
ugly blocks of apartments, don’t drive past; if you see one for sale,
go ahead and have a look, and open your eyes to the possibilities.
Michael, great talking to you, thanks for your time.
Six mistakes to avoid when buying older units – Michael Yardney
Real Estate Talk
Kevin Turner's Podcast with Michael Yardney
27 September 2016
Kevin: Last week in the show, I was talking to Michael Yardney
about not so much the pros and cons but the benefits of buying older
units and how adaptable they can be. It got us to thinking during the
week that obviously, we go wrong in a lot of areas in real estate;
where can you go wrong with buying older apartments? What should you be
aware of? What should you avoid?
not all properties are good investments ... probably less than 5%
Michael: Just to make things clear, we’re talking about what when
you and I were growing up used to be called flats that were built in
the 1960s and the 1970s and today make good investments compared to
many of the new, smaller, off-the-plan high-rise and high-density
blocks. But again, not all properties are good investments, and in my
mind, still probably less than 5% of established apartments – these
older what we call flats – are investment grade.
choose the location
One has to start from the top and choose the location. You can’t just
buy any apartment and hope it’s going to make a great investment. Maybe
70% or 80% of your investment property’s performance is going to be
dependent upon its location. The rest of it is, of course, going to be
dependent upon the property’s specific, unique features.
A common mistake investors make buying established apartments is not
strategically looking at the state and then that location, the suburb
in the state – one that’s got the right demographics that’s going to
outperform the averages, because it’s a gentrifying area, it’s an area
where people’s wages are high, it’s an area where people are moving
into and there’s a lack of supply and lots of demand, Kevin.
Kevin: We did make the point last week, though, that a lot of
those older units are in some of those areas that are becoming
gentrified. We can look around the capital cities and think of many
locations where the flats were always looked down upon but now they’re
in quite good, emerging areas.
Michael: In the early days – sorry, my early days – the inner
suburbs were the working class areas. Interestingly, if you look back,
that’s where a lot of the factories used to be as well, a lot of the
manufacturing and warehousing, and the heavy industrial was in the
inner suburbs, and the workers were living close to them.
Then in the 1970s and ’80s, with the advent of our freeways, the
industrial areas moved to the outer suburbs and migrants moved into
these inner suburbs. They became a bit more bohemian, and restaurants
and cafés came out. And these areas are still gentrifying, Kevin, so
yes, there definitely has been a significant change, hasn’t there?
Kevin: Yes, there certainly has. I guess, too, when you’re
looking at some of these older units, you really have to dig deep and
have a look at the history of the building, not so much just the
history of the area.
Not just the area, but also the right streets
Michael: Very much so. Not just the area, but also the right
streets. Not every street in the suburb is going to be good. You want
one with a good feel to it. Some streets have a different feel, a
better feel, a unified feel, and if you’re buying apartments, you’d
like, if possible, to have a street where there are homes and a lot of
owner-occupiers, as well, rather than a street just of apartments.
But you’re right in what you were saying a month ago, Kevin. That you
can get a lot of research not just on the area, but because it’s an
established apartment, you can get information about previous sales,
sales within the block, how it’s performed, owners corporation
information about potential disputes, repairs, sinking funds – the sort
of information you can’t get on new properties, because they don’t have
You only really know what a new property is worth when it’s sold down
the track in the secondary market, and unfortunately, some investors
are getting disappointed when they see what happens to the property’s
prices a year or two after they’ve purchased it.
Kevin: Yes, and that’s a good thing about older units, too – they
do actually have a history; you can check on it. We can learn a lot
from looking back, as well.
What about position and outlook, Michael?
Michael: When you’re buying new property, you often have an
opportunity within the block to choose “Do I want to be on the 10th
floor or the 4th floor? Do I want to face north, south, east, or west?”
You don’t have that luxury of choice with established properties, but
that doesn’t mean that you should buy it if the outlook and the
position in the block isn’t good.
Light and amenity is important, so the direction it’s facing and being
able to get good light during the day, the views that you have are
important, what floor it’s on. There’s not a correct answer. Some
people don’t want to be on the ground floor because they feel a level
of security on the first floor.
I think in these older blocks, if you had to choose, the prime position
is the first-floor front unit, and sometimes if there are two or three
stories up, maybe the top story, people don’t particularly want. We’ll
often find tenants and owner-occupiers don’t want to walk that extra
level with their shopping at the end of the day.
So yes, look at the positon and the outlook of the property, and if it doesn’t suit, just go to another block [building].
Kevin: Michael, many people are concerned when they’re buying a
unit that there’s no land with it. How does that impact the value?
Michael: That’s an incorrect thought that people have, because if
you own an apartment in a block of ten, then you basically have a tenth
of the land component underneath you, and I’d rather own a tenth of a
block of land in a good inner suburb of Melbourne, Sydney, Brisbane, as
opposed to hectares of land out in the middle of nowhere. It’s the land
component that is important, and that’s what is going to create the
The other interesting thing is that a lot of these established
apartments are bought below intrinsic value, meaning you couldn’t
replace them. If that block of ten apartments burned down, under
today’s town planning regulation, you wouldn’t be able to build them at
that size or with that amount of car parking, so you’d often have to
dig in and do underground car parking, and it would be much more
So the land component is what’s underpinning the increasing value of
your property, because as I said right at the beginning, 70% or 80% of
the heavy lifting is going to be done by the location and the land, and
the rest by the value of the property.
Kevin: One of the outstanding things that we’d discussed last
week, too, when we’re talking about these older units, Michael, is the
opportunity to renovate and add some value.
Michael: In today’s market where the property market is not going
to grow as strongly as it did in the last couple of years, I like the
concept of adding value. I’d still be buying established properties
even if I didn’t have the budget to do a renovation now, because the
added value upside is still going to be there a bit further down the
track if you can’t do it today.
bring the insides up to the standard
So buy the best property you can, knowing that in two, three, or four
years’ time, you’re going to have the ability – when you’ve saved a
little bit more – to add value, and that’s going to bring the insides
up to the standard – or it should bring the inside up to the standard –
of the modern apartment with new kitchens, new bathrooms, and that’ll
make it attractive to tenants and ensure that you have a top performing
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