Friends who build together, stay together.
Mates and relatives who want to break into the property market are pooling money to buy and develop homes in trendy suburbs that they would otherwise be priced out of.
Property syndicates, aimed at commercial investors and the rich, have long existed.
But in a hot market, joint residential ventures are gaining popularity as a way to break into a dream, inner-city suburb.
A group formed by boutique developer Tim Riley, of Property Collectives, moved into their custom-built townhouses in McCracken Avenue, Northcote, about two years ago.
Andrew Ashcroft and his wife Tanya Wilson, who have a 15-month old daughter Aurelia, are part of the McCracken cooperative and are embarking on another real estate syndicate, also in Northcote.
Mr Ashcroft said he would not have considered a new, off-the-plan build.
‘If you go off-the-plan you can’t be sure of the quality or if you are going to hear your neighbours, but with this, you have more control and involvement,’ he said.
‘You have something that you would otherwise have not been in the position to source or buy.’
Members of Mr Riley’s other syndicates, in Northcote and in Thornbury, were first home buyers in their 20s struggling to purchase in postcodes close to the CBD, so they teamed up with their parents.
The initial outlay for a project – between four and eight dwellings – is significant, requiring $250,000 capital, with about half a million dollars borrowed.
The end result is a three-bedroom townhouse, including land, for roughly $750,000. Mr Riley says the final cost is 20 per cent cheaper than an open market price.
‘I have a number of partners who are doing it to get into their first home, and their parents are coming in and helping them out with the capital,’ he said.
‘A lot of the partners are doing that and I am doing that, too – I partner up in all of my projects. I have partnered up with my Mum, my Dad, and friends. We share a unit and split it according to how much capital we’ve each contributed.
‘It is probably going to be worth up to mid $900,000 when finished.
‘I think that is the main driver. Without creating that capital and paying basically wholesale costs for townhouses, they probably wouldn’t be able to buy in as a good a location or as big a place. From a design perspective, it is very attractive for people to get involved in the process of the design of their future home.’
Property expert Justin Lawrence, partner of legal firm Henderson and Ball, said residential syndicates were gaining popularity as real estate prices rise.
‘A lot of people are finding it very difficult to get into good property, in good areas, without being properly advised and guided into them,’ Mr Lawrence said.
‘It comes down to the structure. I am telling people that a unit trust set-up is the way to go.
‘I had clients who had a property in Glen Iris and the idea that their 22 year-old daughter could buy in Glen Iris was the same as her buying a Rolls-Royce – there was no chance.
‘So they decided to pool their resources to enable her to buy in that area – Ashburton as it turned out, the next suburb over. But without that set-up, there wouldn’t be an opportunity for her to buy a fairly rudimentary property but in a very good area.’
Mr Riley was an underbidder at the recent auction of an unrenovated, century-old Victorian in Barkly Street, Brunswick East, which sold for $3.4 million, and is currently searching in Collingwood.
The process can take up to three years, from assembling buyers, to selecting the site, undertaking a feasibility study, obtaining planning permits approval, valuation for construction finance and building quotes.
‘Before we bought the McCracken Avenue site we did about 13 or 14 feasibility studies and lucked out at maybe five auctions – it took about 10 months,’ Mr Riley said.