Investment Property - Serviced Apartment? Cheap Regional? Other?

• 

  obiwanmy on 05/05/2016 - 10:32

  +5

  I could be wrong but I believe that the market for service apartment is somewhat limited to only investors (i.e. not home buyers as they cant stay in it, but I may be wrong). Therefore capital gain could be limited due to demand / limitation.

  However in saying that the 7% return is much better than the interest in the bank (pre-tax - you might need to also include your personal tax in to get the net gain). However if you do need to sell it fast, might have an issue in terms of getting a good capital gain due to limitation in market.

  Just my 2 cents.

• 

  Msfrugal on 05/05/2016 - 10:54

  +1

  Just wrote a long reply and somehow does t seem to have made it.

  Where is prop? Syd Brisbane Mel

  You need to get end of financial year statements for last couple of years on the unit.this shows you exactly how much costs are and what owner got net for the unit.

  Also I'd ask to see statements of a couple of other similar ones to ensure that they fairly allocate the bookings.
  They can block out owner details if they claim "privacy"

  • 

    cooni on 05/05/2016 - 18:10

    Sydney.
    Hmmm, the wording of the listing suggests that since the apartment is leased by a serviced apartment group, I get paid even if it's vacant. Now that you mention it it almost seems too good to be true. Will def. need to check that out.
    And thanks, will ask for statements.

• 

  [Deactivated] on 05/05/2016 - 11:35

  +8

  We've financed a lot of serviced apartments over the last 10 years and we've seen the following trends:

  • Subdued capital growth, especially in high density blocks. Lenders have really backed out of this space and many lenders simply won't lend for serviced apartments in large (~30+ unit) developments. If they do, the max LVRs can be 50-60% for cheap interest rates. This is not always worrying to people with a healthy deposit or a lot of equity in their portfolio, but it puts downwards pressure on resale because many of the potential buyers face finance challenges at present.
  • A changing business model. Sites like Airbnb have seen a big shift in this space. For some it has been a big win, for others it has eroded margins. For all operators in the space it has added a new layer of complexity and opportunity. As such, these investments definitely require a greater level of due diligence and the increased rental returns that these apartments often deliver are somewhat a product of the added complexity of the proposition.
  • A space that has been heavily dominated by foreign investors in certain locations. This is not a bad thing if the government and lenders still support high levels of foreign property investment and foreign source income lending, but there has been somewhat of a tightening in this space of late and, as most people know, it is a topic of some political debate.

  TL:DR It's a really interesting space - some people are winning big but it's a far more complex proposition than a plain vanilla property investment with a long term tenant in an area with stable rents/demand.

  • 

    cooni on 05/05/2016 - 18:11

    Much appreciated.
    Indeed it looks like capital growth would be much less - but some areas look like they are really hitting the brakes or higher growth areas are already too expensive.

• 

  Kenb0 on 05/05/2016 - 13:24

  +2

  • Only pay sinking fund of $642pq - tenant pays strata, water, council

  What happens when the serviced apartment mob end up not renewing the lease in future? Owner will then be up for those costs too.

• 

  User78426 on 05/05/2016 - 13:39

  Buying a serviced apartment means you are buying a part in a building. Buildings depreciate in value, real increase in property is in the land or location. Units/apartments don't increase proportionally compared to stand alone houses.