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

Discussion in 'What to buy' started by Rugrat, 17th Feb, 2016.

Join Australia's most dynamic and respected property investment community
  1. Rugrat

    Rugrat Well-Known Member

    Joined:
    16th Jul, 2015
    Posts:
    376
    Location:
    Australia
    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

    Joined:
    18th Jun, 2015
    Posts:
    717
    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
     
    jefn89 and Xenia like this.
  3. D.T.

    D.T. Specialist Property Manager Business Member

    Joined:
    3rd Jun, 2015
    Posts:
    9,189
    Location:
    Adelaide and Gold Coast
    Would not touch
     
    Paterson00 likes this.
  4. Lisa Parker

    Lisa Parker Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    380
    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.
     
    Paterson00 and Xenia like this.
  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    3,977
    Location:
    Canberra, Brisbane and Sunshine Coast
    The property has been listed since August 2013.....so that says something too.

    Cheers

    Jamie
     
    Paterson00 and Lisa Parker like this.
  6. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    1,648
    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

    Joined:
    16th Jul, 2015
    Posts:
    376
    Location:
    Australia
    Thanks for the replies everyone. :)
     
  8. Darlinghurst Boy

    Darlinghurst Boy Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    858
    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 .
     

    Attached Files:

    Last edited by a moderator: 18th Feb, 2016