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Can someone shed some light on these kind of investment properties?

Discussion in 'General Property Chat' started by Rugrat, 17th Feb, 2016.

  1. Rugrat

    Rugrat Well-Known Member

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    16th Jul, 2015
    Posts:
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    Location:
    Canberra
    Just been checking out allhomes and noticed a couple of 'investment' serviced apartments that look like they are part of a hotel. I was wondering if anyone would be able to give me any insight into them (not sepecifically this one, its just an example):
    115/108 Northbourne Avenue, Braddon Real Estate For Sale

    What are the pro's and con's? Is it just a case of 'don't touch with a 10 foot pole'? Or do they have some merit in some situations?
     
  2. Tony Fleming

    Tony Fleming Well-Known Member Business Member

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    Location:
    Sydney
    Studio apartments are essentially hotel rooms
    Cons: Hard to finance as they are under a certain sqr metre the banks require a larger deposit
    Very high strata charges
    Expensive Management fees
    Tiny

    Pros: Cheap
    Desirable location
     
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  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    Location:
    Adelaide, SA
    Would not touch
     
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  4. Lisa Parker- Buyers Agent

    Lisa Parker- Buyers Agent Well-Known Member Business Member

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    24th Jun, 2015
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    Location:
    Melbourne
    Positives;

    Can be positive cash flow depending on outgoings (unlikely if managed by person overseeing whole block, more Likely if you can manage privately.
    Cheap entry price

    Negatives;
    Hard to on sell
    Very low capital growth typically in this sort of property
    Lower loan to value ratio (means more of own cash in)
    Fewer options of lenders due to investment type
    Challenging to access equity (because they don't grow in value that much and fewer lenders as options and lower LVR's)
    Having it managed by a company who runs the whole building means you have little to no control over anything to do with the investment. It also means you are at the mercy of their management agreements.
     
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  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Location:
    Canberra and Sydney
    The property has been listed since August 2013.....so that says something too.

    Cheers

    Jamie
     
  6. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Location:
    Sydney
    Financing is hard which somewhat limits CG is its hard for the mass market to purchase.

    Here are the issues:

    1. Only a limited number of lenders take on Serviced Apartments as acceptable securities
    2. Out of these limited lenders - a further limited number of lenders only accept a Serviced Apartment if it can be used as an owner occupied residence in which most SA's don't allow
    3. Even assuming you can owner occupied the property - most lenders limit their exposure to the development and chances are they have already financed a certain number of units in the development and are not willing to take on any more. This is evident in all development but more so for SA's since their is a limited number of lenders that finance SA's in the first place.
    4. Future valuations are a basket case so you will struggle pulling out equity
    5. Restrictions on LVR
     
  7. Rugrat

    Rugrat Well-Known Member

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    Location:
    Canberra
    Thanks for the replies everyone. :)
     
  8. Darlinghurst Boy

    Darlinghurst Boy Well-Known Member

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    Location:
    Darlinghurst Sydney
    Its a bit like those ones in Broadway ,UNiLodge building,Sydney, they re selling for average 180k onwards , they're always for sale.
    Company title, rented out to students, high strata fees.
    From 16 square metres .
     

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