43 Erin Street
BOUGHT* - $4,070,000
The sizeable backyard of this large period home drew a special crowd today. With only 25 in attendance, this auction reporter strongly suspects that most were doctors, given the potential and position for this property to be used for consulting rooms. Auctioneer Chris Burne invited a bid from the crowd to get started and he was rewarded with a $3,200,000 gen...

Crowd Numbers: 25 people
Bidderman: 3 bidders
 

43 Erin Street RICHMOND

Benefits

Higher positional potential for long term growth
Growth above average metro in last decade
Higher risk as newer precinct
Lower risk established look
Area distance from CBD

Concerns

Poor rental prospects
Requiring significant additional cash to purchase price
Other properties in the street could be a negative issue
Mal James
Mal James
Principal Buyer Advocate
0408 107 988
mal@james.net.au

Comments on 43 Erin Street RICHMOND

Having over the years bought a number of buildings for doctors I thought, on first glance, that 43 Erin Street would be a property worthy of examination, hence my visit.

When considering any building for use as medical rooms there are a number of basic criteria you look for before you even enter the front door.

Top of the list is: Current permits for doctors or the possibility/risks associated with being able to get the required number of permits through VCAT.

What does that all mean?

* How many doctors do you need to run your centre to make it profitable -eg cover admin and building costs and still make a profit as opposed to simply renting. If you are thinking two or less doctors operating at any one time then your main priority is not a good financial outcome more an emotional outcome. In other words you are in love with the idea of owning medical rooms for your own needs rather than primarily making a profit. Nothing wrong with that, especially if you are a surgeon and can afford it - just don't kid yourself you are buying to make a profit.

* At three or more doctors practicing at any one time the financials start to have a chance of working both in cash flow (rental - costs = surplus) and growth (lessening supply, increasing demand). Please don't think that ancillary health services such as a few physio sessions will cover their costs - they don't.

* With three or more doctors practicing at any one time you are going to need a permit for 3 doctors or more.

* The primary criteria for doctor permits is car parking - councils vary but 4 or 5 car spaces per doctor permit is the norm - for 3 doctors technically you would need say 15, but a smart town planner and some argy barg can see 3 permits and say 8 to 10 car parks being the agreed equation.

43 Erin Street on the face of it looks a gold mine as its doctor permits are unlimited (agent claim have not seen contracts). This unlimited permit applies due to a grandfather clause before the town planning rules changed many years ago. Wacko - this is a good start and the rear yard size and rear lane access supports a good amount of car parking.

43 Erin St appears a go, go, go on the car parking issue - it appears as good as it gets (please check contracts though).

So why then has this building been on the market several times in recent times and today is still in a state requiring significant renovation, when it has unlimited doctor permits and is across the road from Epworth, a major hospital.

Why? Economics in 101 and 202.

To buy your own surgery rooms well, the numbers still need to stack up.

* Renovation costs per surgery to make them accredited +

* Renovation costs to simply bring this building up to an acceptable state is one cash flow consideration. +

* Purchase price. Unlike a doctor's home which can be whatever you want it to be, a doctor's workplace needs to make economic sense in the longer term or it means the doctor(s) is cash supporting the business instead of his/her lifestyle.

There are very clear limits on what rooms are worth (eg possible income per annum from each room less direct admin and staff costs and less building maintenance and interest costs)

If you over pay or go in without proper due diligence, then no matter what additional tax concessions you can get; like active business asset or rent subsidies, it won't make sense to own your own. Sorry I'll rephrase that - it won't make economic of financial sense to own it - it still may make emotional sense to buy it.

With 43 Erin Street we get different numbers (due to renovation, interest on purchase and running costs) to what others may have arrived at, if this is in the future is to be doctors rooms rather than a a family home (which we have a separate rating comment on).

Mal James's Comments on 43 Erin Street RICHMOND

This is part of the James Buyer Advocates series on current investment opportunities.


We have looked at a specialist investment at 43 Erin St Richmond

http://www.james.net.au/rating/43-Erin-Street-RICHMOND

A potential development investment at 653 Toorak Road Toorak

http://www.james.net.au/rating/653-Toorak-Road-TOORAK

A passive/super fund investment at 11 Scott Street Kew

http://www.james.net.au/rating/11-Scott-Street-KEW


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0
Bedroom
0
Bathroom
8
Parkings
650sqm
Land Area
Floor Plan Agent

Sold - 1:30 pm Aug 30 2014

Agent Declined Quote

North Facing

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What our clients had to say about James

We love the house and we‘re so glad we got it - for a great price too! We always felt we were in safe hands, and your depth of knowledge and attention to detail gave us confidence throughout the process. We especially appreciate your willingness to go the extra mile, and the professional level of service from yourself and the team.

Anna & Josh

CARLTON NORTH

Read all testimonials