AIRBNB, 2 apartments, need some advice please.

Hi guys,

I need some advice.

I currently have two off the plan apartments for which I paid a deposit on $25,000 each. They are due to be completed at the end of November.
Initially I was going to buy two of them and set them up as AIRBNB.

However, my salary has taken a hit and now I can only afford one of the apartments.

Apartment A is a 1 bedroom apartment for $455,000.
Apartment B is a 2 bedroom for $660,000.

Now sadly I will have to default on one, lose my $25,000 deposit and also cover any other expenses for the developer. I was nominated for the sale of the apartments and can't on sell until after the settlement, the developer won't let me do it sooner.

I am trying to work out which apartment to keep for the AIRBNB set up. My friend says I will make more money renting out the double bedroom but it also more expensive to run due to a larger loan, council rates and body corporate.

Any advice would be greatly appreciated. I really messed up here I know.

 

I think.... many people mis-understood the effort of running Airbnb business. It's not as easy as many think. You need *a lot* of effort to manage check in, check out, cleanings, etc. Cost of time for managing check in? Utility cost? Cleaning fees? You might hire cleaners but I can assure you cleaners wont do better job than yourself doing it. 2 bedders will most likely attract a family or a group of people who most likely going to either have party or gathering kind of things in your apartment, so there come risk of wear and tear or warning from body corporate regarding noise, etc?

Plus it's extremely competitive out there, many of these "secondary landlord" sub-lease rooms or even entire apartment out with basic furniture and low rates, which destroy the market. It's certainly not as easy as three, four years ago. Just my feedback.

As for which one to take, 2 bedder will definitely do more price growth than 1 bedder but the holding cost would also be higher, which is the same for every investment. No pain, no gain.

 

What's the location? Are the 2 apartments in the same building? Which has a better aspect? Agree with @ATANG that a 2 bedder would be more desirable than a 1 bedder.

What did you mean by your salary has taken a hit? You got demoted? Have you spoken with your broker yet?

 

Thank you for replies.

I am leaning towards the one bedroom, as it may be easier to hold onto and manage for a year or so and if it doesn't work out for me then I can always put it on the market to sell.

I was meant to get another higher paying job but that fell through mid year.

I've spoken with my broker and I can only buy one apartment.

 

And it's in St Kilda, Vic.

 

You also need to think about whether market value will still hold if you might let it go in next year or two. But I think even if you lease it out in fixed term permanent lease would still be sufficient to pay the repayment since the rates are so low.

 

I'd be talking to another savvy broker just to be sure. Can you get the deal across the line with another purchaser and than on sell? Long term I would be taking the 2 bedder over the 1 bedder. Much harder to sell/rent a one bedder. Hope it all works out and you get both.

 

Are you sure about this? If you put the apartments with two different lenders you might scrape it through. Have you had a chat to a broker or a bank?

 

Get another opinion. Also get some more legal advice. It used to be pretty easy backing out of a nomination, check it out. Then check out this 'can't resell before settlement' advice. That doesn't sound legit either. Get it checked out, and proceed all the way with an independent opinion. maybe @Terry_w might be able to comment.

 

Your lawyer would have reviewed the contracts for you before you placed the deposits. Have a look at the contracts. Your lawyer should be able to tell you all that if you intend to back out. Or did you not use a lawyer?

 

You also posted a similar thread back in august. You must have spoken to your lawyer and broker. What happened between august and now?

 

Hi guys thank you for replying.

Basically here is what happened:

In February this year I wanted to buy an apartment for AIRBNB set up and a friend recommended me this woman (seller) he was working for who specialised in selling apartments in Melbourne.

I did not seek legal advice and she nominated me for the sale of the first apartment (she was the original purchaser). I would need to pay a $25,000 deposit to secure the first apartment. These apartments are both off the plan.

A few weeks later my loan broker said I may afford to get two apartments. I should of paid another $25,000 to secure the second apartment but the seller woman said that I need to pay an additional $25,000 to purchase it... I foolishly paid the money in total $75,000 for the two apartments as a deposit and then a few weeks later realised that I was overcharged $25,000 as the seller basically wanted it "under the table". I transferred that money into her bank account so there was a paper trail.

After getting advice on this forum here I was told by the forum members that I was conned into parting with $25,000. I should of paid $25,000 for each apartment totalling $50,000, not $75,000.

After contacting the seller, she said she would look into it but after 1 week she went all quiet on me.
I then contacted a lawyer and explained what happened. My lawyer said that what the seller did was illegal and I need to get my $25,000 back.

Here is where it gets tricky.

The seller agreed to pay me back the $25,000 but I would need to sign a legal document which releases her from any further responsibilities and duties to me in regards to the properties. My lawyer advised not to sign it because it had too many restrictions and clauses... but foolishly under the guidance of my friend who wanted to avoid any further conflict with the seller woman he was working with I decided to sign the legal document and get my $25,000 back.

My current situation is that I make $60,000 PA, I already have an investment property which I am paying off $350,000 loan).
The two apartments are:

one bedroom is $455,000
two bedroom is $660,000

I have decided to go for the two bedroom apartment. I was meant to be getting another job that would put me at $100,000 PA but that fell through hence why I cant afford both apartments.

My current broker says I can only afford one apartment given my financial situation. I also make an additional $15,000 PA which basically brings up my salary to $75,000 PA. I have not yet disclosed that I make an additional $15,000.

So the worst case outcome is I default on the one bedroom apartment and lose my $25,000 plus any penalties which will push it higher, possibly into mid $30,000 or more.

My other option is I have a friend who may be able to help me fund the purchase of the second apartment. He is working out the details with a lawyer to see how this can be done... I will not be able to get my deposit money back from him for a while, possibly a few years but I figure it's better to do this than losing my deposit plus other penalties to the developer. His main concern is how high the body corporate and council rates will be (these have not been released as the apartments are still being built).

Lastly, I was wondering can I somehow void the two contracts of nominee and get out of the purchase altogether because the seller basically blackmailed me into signing the release form so I can get my $25,000 back which she illegally took from me in the first place. Can I prove that in court? Is this even likely?

I have one month left till the settlement and may need to speak with another broker to see if I can manage both apartments via AIRBNB.

Any advice is greatly appreciated.

 

I'd talk to @terryw as soon as possible.

 

You poor thing. Looks like you got conned badly.

I would speak to a solicitor ASAP and see what rights you have.

 

But there is no point in getting legal advice if you don't follow it.
Marg

 

No one can help you, but yourself.

 

I don't think that is correct.

 

What would the units rent out for and what are the costs ? ie what is the net yield ?
At current interest rates does it return much of a surplus ?

 

Although the standard contract "might" not allow you to on sell the apartment, there could be a possibility that you can prepare a new contract and start marketing the property whilst under current contract. Once new buyer is found, prepare settlement for same day as you'r current contract.

Highly recommend you speak to a solicitor. If you can write up another contract, you could even profit from the situation if it's gone up in value.