Student accommodation investment property help

• 

  holdenmg on 11/06/2020 - 03:36

  +2

  Hi,
  I presume this is Unilodge or Scape or something similar?
  Don't forget about insurance, body corporate fees and the like.
  The Capital Growth isn't usually what you might hope for, particularly
  in the CBD because of the oversupply of apartments.
  I'd wait until the situation with students becomes clearer.

  • 

    mskeggs on 11/06/2020 - 10:31

    +7

    I’ve looked into Unilodge in Sydney several times.
    Some things to consider:

    • you can’t get a regular mortgage on these properties.
    • capital appreciation is almost non-existent. Lucky to get inflation.
    • if you get Unilodge to manage it, it is very costly
    • you can let it to students or other educational people (e.g. uni tutors) but not regular Joes.
    • Strata fees are very high
    • the properties are not very well maintained. Residents complain of noise and odours.
    • many are vacant for 3 months each year

    Basically, the income pays about 4% after fees/charges if everything goes well and the lack of capital growth makes it a poor investment.

    • 

      holdenmg on 11/06/2020 - 10:47

      +1

      Well put.

      Even if you are a Cash Buyer, consider how easy it would be to sell in the future to those seeking finance to buy from you.

      I assume the building isn't affected by the cladding debacle?

• 

  [Deactivated] on 11/06/2020 - 03:46

  +7

  Dont bother prioritisng hecs pay off - the cheapest loan you'll ever have, and there is no finacial advantage to doing it.
  Re student housing remember they are cheap as there is next to 0 capital growth in essence you are buying an annuity. Without expenses its 8.w7% yield which drops quickly when you add in your expenses.

• 

  capslock on 11/06/2020 - 07:11

  +2

  If you need a loan, some banks won't take this type of property as security or will want a higher deposit.

• 

  [Deactivated] on 11/06/2020 - 08:16

  +1

  it is a risky investment. at the moment, there's an ongoing spat with the largest source of overseas students. not sure if that's all posturing and things will resume normality soon. but it's not looking pretty. maybe hold on a bit first.

  there's talk about other overseas students coming. doubt so, as students dont grow overnight on trees. existing students would have already chosen their unis of choice. with global recession coming, the overseas student market is expected to shrink and all unis around the world are going after a shrinking market. looking at the lasting uni rankings, although some Australian unis improved, we're not in the top.

  the domestic student market isn't going to fill up the shortfalls in the oversupply. read in brisbane, a student accommodation in toowong is now used to house the homeless (due to covid) and it's causing a lot of distress to the surrounding neighbourhoods. in this case, not only the student accommodation block is affected but the suburb too.

• 

  [Deactivated] on 11/06/2020 - 09:03

  -4

  Just lol

• 

  netjock on 11/06/2020 - 09:34

  +2

  Suggest if you can find a building that is not students only. Not student only opens up a bigger market. You might save $60k buying student only but if student market tanks then you have a fight with the managing agents or even worse if they go out of business.

• 

  rambutann on 11/06/2020 - 10:32

  +2

  Yeah you're better off spending twice as much, buying a 1 bedroom apartment, living in it for a year (to avoid stamp duty), then rent it out.
  Body corporate of student accom would be huge.

  If you're adamant on student accom, id suggest going and speaking to a broker as you may quickly discover that they will have different loan requirements on student accom.

• 

  Porker on 11/06/2020 - 10:39

  +1

  What is your goal with the purchase? Buy and hold, with intent to resell at higher capital? Or a steady and on-going income stream? The capital growth on these places is likely minimal if any.

  Be clear about what you want before making such a purchase as it may not achieve it, plus time frame.

  Also the leasing contracts will be very important aspect - are you managing it or will it be through the association?

  Eg. if you're not managing it, their rental contract with you may say they'll only pay you $1000 per month for the next 10 years (5 + 5 year lease options). But in reality, they may charge increased/indexed fees to the students (ie. get more money from them), but you're still only being paid that fixed amount.

  Then there's on-going and incidental costs. Eg. If the place is being leased furnished, then those costs for maintenance are likely on you.

  So it may be $1000 per month minus (-) administration fee - GST - owners corporation maintenance (eg. elevator, foyer carpet) - room maintenance / item replacement. Then (!), minus mortgage loan interest/repayments. Assuming you're in a position of still making a bit of profit, don't forget to minus Government income tax.

  I had serious reservations about investing further into property, also because land tax (in Victoria) is killer. I buy close to where I live as I do most of the upgrades/maintenance myself. The pandemic presented a GOLDEN opportunity to invest in shares, and I've made 25% (overall) so far.

  • 

    deeznuts1234 on 11/06/2020 - 14:27

    The general idea is to use it as an on-going income stream and eventually selling it down the line as I would like to do something with my money other than just holding it at this point. I feel as if I missed the opportunity in the stock market so I'm too afraid to enter now.

    • 

      Porker on 11/06/2020 - 15:02

      You're demonstrating good financial maturity to invest as opposed to just save, and at a young age. The student apartment may assist with a few extra dollars on the side, but I suspect that you won't get much in the way of capital growth in the end, or the amount of growth won't necessarily outweigh all the other costs and hassles etc along the way.

      I knew nothing of the share market pre-covid. I quickly learnt and spoke to who I needed to to get some basic understanding and how to buy (not sell yet). The market is down and although there are some recoveries, I feel it's still overall down so still a good time to buy. BUT, as I mentioned above with knowing your goals, I intend to hold onto the shares for at least 5 years for them to recover.

      With any type of investment or areas you wish to develop, be sure you get the proper mentor/teacher. Find someone that has achieved what you want, and learn from them (as a start).

      • 

        deeznuts1234 on 11/06/2020 - 15:27

        I have a commerce background so I've meddled in shares before, I watched as PointsBet fell to $1.2 and was considering going in when it was back to around $2 but I guess that's all in hindsight right seeing as its $7+ now and similarly with Afterpay but I feel like I missed a big portion of the growth. Thank you for the advice on the student apartment, I think at this point I'll probably not go through with it and look elsewhere as everyone has recommended.

    • 

      DaDollarz on 11/06/2020 - 16:51

      +1

      Food for thought: If you choose to purchase another property down the line after selling this you will have to pay stamp duty on it.

      Stamp duty for a 1-2 bedroom apartment (non student accomodation) will set you back say $20k-40k (ball park).

      Think about how long it will take you to make $20k income on this investment.

      It might be worth considering if the amount of income you make from a student accomodation apartment is worth have to pay stamp duty down the line. Might be better of saving up for an apartment and taking advantage of first Home owners.

• 

  [Deactivated] on 11/06/2020 - 12:28

  +3

  Many students - demand for student accommodation good - capital gains + rental income.

  Average students - over supply of accommodation - expect rental income only.

  China boycotting Australia - dumping student accommodation - expect to make a loss you cannot offload and keep paying rates and strata.

  If you find a better investment opportunity between now and when things get better, this investment will be a ball and chain.

  If you find yourself out of a job, the bank will have to liquidate your assets. That apartment is going to be dumped for a whole lot less.

  The risk is just disproportionately bad for the returns.

• 

  capslock on 11/06/2020 - 13:02

  +1

  As you can see from the comments, a lot of people don't like student apartments so keep that in mind as a potential problem when it comes time for you to sell. The buyer pool might be small. Then again you might choose to never sell.

  I don't agree that it will not have capital gains. I think it will follow what the general apartment market is doing unless the apartment is restricted to students only and the students stop coming.

• 

  Gelato on 11/06/2020 - 14:03

  +1

  I know some big banks would only borrow up to 50-60% of the student accomodation price
  Other non bank lender/online lenders may not even give you a loan

  Also it’s hard to resell and if you pays off after 5 years, then you’ll be positive gearing which you may want to plan out your tax

• 

  Gros21 on 12/06/2020 - 12:23

  +1

  Ive had a look at exactly this in brissy.

  Body corporate fees are crazy high.

  students will not look after property well.

  They will be picky and want the best and newest crap latest colours ect ect.

  Look at investing in a nursing home units

  They will love the 20 year old tiles in the nursing home and wont keep complaining and many have a waiting list.

  Again finance will be an issue but a broaker will be able to help.