Looking at a Potential Apartment to Purchase, but The Strata Admin Fund Is Negative $270,000

GrimCheaper on 22/08/2023 - 23:36
Last edited 22/08/2023 - 23:46 by 1 other user

Hi,

My partner and I were looking at an aparment in a complex we really liked the look of. Although, after getting a copy of the strata report we were baffled to see that the administration fund is actually minus $270,000. It doesn't really go into detail why, and it seems that the strata levy is now only putting money into the admin fund, and not the captial fund. I assume this is to try and build it back up. I think the building is less than 10 years old.

Has anyone heard of such a crazy deficit in an admin fund before?

Home & Garden

Comments

  • GrimCheaper on 22/08/2023 - 23:36
    +14

    Just as a side note. We definitely did a 180 and decided to NOT purchase this place.

    • hasher22 on 22/08/2023 - 23:49

      Good choice, I would back out as well.

      No reason on the debt, seems like bad management of funds. Your solicitor should maybe have picked up previous spending on why they're in -270k debt, maybe some hints like major repairs previously etc… the strata minutes should have given the answer or hint something is up with the funds.

      • GrimCheaper on 23/08/2023 - 10:57

        Thanks. I’m looking for the minutes now. Hopefully that will shed some light.

  • Muzeeb on 22/08/2023 - 23:46

    How many apartments in the complex and what were the annual fees?

    • GrimCheaper on 23/08/2023 - 10:54
      +1

      I think about 400. They are putting all the levies into the admin fund and nothing into the capital works fund. I think this is to replenish the deficit. Although, technically they could probably get it back into the green in one quarter? 400 units x $700 levy per quarter = $280,000

  • TheMindsetTraveller on 23/08/2023 - 01:32

    What is your Lot size, what is the entire total lot numbers in the strata?

    I mean if you are 200 and the entire scheme is 27,000, it isn't too scary, just a thought.

    • GrimCheaper on 23/08/2023 - 10:55

      About 400 units and I think I’m avg the strata fees are 700 which they are just putting into the admin fund - for now. So they should be able to get it back to green in one quarter. So maybe not so bad?

  • HardQuiz on 23/08/2023 - 08:12
    +3

    Run

  • cashless on 23/08/2023 - 08:39

    Opal Towers, Sydney?

    • Archi on 23/08/2023 - 09:21
      +4

      if it was, it would be more than 270K in debt

  • djkelly69 on 23/08/2023 - 09:05

    Either fund being that much in debt would be worrying, but the admin fund especially so. Seems hard to believe you can miscalculate the day-to-day expenses of a strata by $270k.

    Is it possible they had just rolled over into a new financial year for the strata, so had had to pay the building insurance, etc, but haven't received the levies for the first quarter/half from the owners yet?

    • GrimCheaper on 23/08/2023 - 10:58
      +1

      Something like this could be the reason too. Everyone seems to be saying to look through the minutes, so I’ll give that a go.

  • coffeeinmyveins on 23/08/2023 - 10:26
    +1

    Need more details.

    of lots (10 vs 100 changes things drastically)

    I think the building is less than 10 years old.

    You think?

    Weird that there's an admin fund of that much within the first 10 years. Did you ask why? Look at the minutes. There could be a reasonable explanation as to why, but it's definitely a red flag.

    • GrimCheaper on 23/08/2023 - 10:57

      Looking for the minutes now. Also have the strata mangers details, so I’ll reach out to them as well.

      • coffeeinmyveins on 23/08/2023 - 12:06

        Just flat out ask the SM what the deficit is caused by. Seems really odd. Was it a misprint? and should be $27k? even then that's a red flag.

  • brad1-8tsi on 23/08/2023 - 11:05

    One of our funds was in negative by $30k on a $50k income. It was purely because we had the ratios wrong. Overall we were still in positive $.

    Unless they have borrowed or owe money, how could they be negative?

  • hmac on 23/08/2023 - 11:06

    Keen for the update OP

  • JafferMoney on 23/08/2023 - 12:30

    NEVER buy apartments.

    • Vind1cator on 23/08/2023 - 12:54

      Why not?

      • JafferMoney on 23/08/2023 - 13:17
        +4

        Unless you want a negative return on your investment, issues with the building, excessive strata/upkeep fees, problems with 4 neighbours who share a wall with you (above, below, left & right)…the list keeps going on…there's a reason why apartments are cheap.

  • miwahni on 23/08/2023 - 22:38

    In a complex of 400 units there could have been a lot of non-payers during Covid who haven't yet caught up with their levies. Whatever the reason, please report back if you ever find out.

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