STRONG BUY — Compelling Entry Price with Significant Value-Add Runway
Base NCF
Combined Upgrade NCF
Break-Even Buffer
Investment Thesis
Prime St Kilda Location
Inner-Melbourne residential, heritage overlay supply constraint, 2km from CBD, walking distance to beach and Chapel St. St Kilda has delivered ~5.5% p.a. capital growth over 10 years. Structural demand floor from lifestyle precinct.
Immediate Cash Flow Positive
Cash flow positive from Day 1 at the base case. NOI of covers interest with a interest coverage ratio — strong debt serviceability at current rates. Break-even price of provides ~$970k of downside buffer above asking.
Two Clear Value-Add Levers
Common area upgrade ($30k) delivers 50%+ yield on cost with 2-year payback. Apartment renovations ($60k/unit) reposition to premium $720–$750/wk rents, adding significant yield uplift and capital value. Both executable without vacant possession.
Property Snapshot
| Address | 1–12/20 Marriott St, St Kilda VIC 3182 |
| Asset Type | 12-unit residential block |
| Asking Range | $4.5M – $5.0M |
| Agent | Buxton Real Estate |
| Current Occupancy | 8/12 units (managed by Hybrid RE) |
| Current Avg Rent | $633/wk per unit |
| Market Rent Range | $650–$780/wk (post-upgrade) |
| Land Zoning | General Residential (R1Z) |
| Heritage Overlay | Yes — limits new competing supply |
| Suburb Vacancy Rate | ~2.1% (vs model 3.5%) |
Deal Economics at a Glance
| Base case purchase price | |
| Loan (80% LVR) | |
| Equity required | |
| Stamp duty (VIC investment) | |
| Total cash required | |
| Gross yield (base) | |
| Net yield / NOI yield | |
| Net cash flow (base) | |
| Break-even price @ 6.25% | |
| NCF — combined upgrade | |
| Gross yield — combined upgrade |
Value-Add Journey — NCF Progression
Net Cash Flow by Scenario (p.a.)
Key Risks — Summary
| Risk | Assessment | Mitigation | Rating |
|---|---|---|---|
| Price risk | Break-even ~$5.72M — $720k above top of asking range | Wide buffer; every $250k below asking = $12,500/yr extra NCF | Low |
| Interest rate risk | Deal remains CF positive at 7.5% — break-even drops to ~$4.77M | Consider fixing 50% of loan; stress-tested in sensitivity tab | Medium |
| LVR classification | Some lenders cap 12-unit blocks at 65–70% (commercial) | Use specialist investment broker; model 70% LVR scenario on inputs | Medium |
| Vacancy risk | Model uses 3.5%; suburb avg 2.1%; Hybrid manages 8/12 already | Existing tenancy relationships reduce transition vacancy to near-zero | Low |
| Renovation execution | $60k/unit renovation upside assumes market absorbs $720–$750/wk | Market data supports; current $633/wk already below market without reno | Low |