Does it ever make sense to buy student accomm, serviced appts or retirement villas?

Or tiny shoe box studios.

Say you're 65, don't care about CG and just focused exclusively on cash flow, does this make sense, given how high the yields can be (I know mgt fees are high but presumably the yields are still higher than a proper investment)?

Or is it pretty much an avoid at all costs sort of thing?

 

I would be most concerned with the difficulty in selling if the need arose. The types of property you mention appeal to a very small proportion of buyers. In a downturn, selling may be virtually impossible at any price.

Of course, you can say that your strategy is to never sell, but sometimes the best plans go awry and selling becomes necessary.
Marg

 

Student apartments at 1185 Broadway in Sydney always advertised for sale most under 200k

Always for sale

 

Very good cash flow once it's all paid off.

 

But same as shares but shares are more liquid and with zero hassles?

 

like what?

 

These types of properties don't have a good reputation, so you will always have a much smaller pool of buyers if/when you decide to sell. Student accommodation is particularly tricky and most mortgage brokers will steer you away from them as they are not always favoured by banks, so obtaining funding could be an issue.

Also, with retirement villages, etc, often the rules dictate that the property must be totally refreshed each time it is sold, so you will be up for the cost of painting, etc. There are also very high ongoing overheads with this type of property.

 

Shares are more volatile.

 

And that's a positive. You can sell anytime.
Student accommodation you might take a few months to sell.... shares are much more liquid. You can sell shares and have money in your account in 2 days. Can't for that with student accommodation.

Regarding price... buy for income and hold for the long term. So if you see the share price go down due to something like a GFC... perfect time to buy. Long term they'll go up and also keep throwing off effortless dividends. But look to ETFs or LICs for more stability/ to reduce risk.

 

I'm happy with cash flow. Why would I need to sell if it's all paid off? We are talking apples and oranges here.

 

I've thought about getting a serviced apartment for its annuity-like properties but have not yet found one that returns the 10% net yield I am looking for to compensate me for the aforementioned resale risks and the extra hassle of managing a property (small as it is for a serviced apartment) vs passive shares. 7% net is the best I have seen in the last few years.

 

Same with shares....never sell. Just collect dividends. But shares are easier to sell than a service apartment or student accommodation, you'd have to agree?

 

Look on Gumtree and you will see all the people desperate to sell retirement shacks tells me they must be very difficult to sell. They are probably just as difficult to rent out.

 

These apartments in Broadway in Sydney are always for sale, i guess you have to do your due diligence.

Anyone know the Strata fees and obviously its company owned not strata , so thats a minus.

 

Slater and Gordon case in point. Never sell when it's close to demise? I'm not saying it's easier to sell a student accomodation but I'm saying if it fits ones strategy who are you to say it's not a valid strategy? @The Y-man I agree it'd be a worry if ones strategy is just buying serviced apartments students accomodation, off the plan etc.

 

Yes correct they are always for sale. I know people who have children studying in Sydney and they bought into it. They then want to resell after children completed their studies. Resale isn't great but if most of loan paid off after agent fees the yield is still not too bad.

 

If finance is required you will encounter problems accessing finance as the accom size is less than lender minimum floorspace

 

If you can pay it off without finance then it may be a good strategy as you'll always get the cashflow to sustain your lifestyle for the next 20-30 years without much risk of not getting paid. You just need to ensure you have enough money left + Super in case any serious medical condition comes, otherwise it may be hard to sell the property quickly. As others have said, shares will be easier which give you the same amount of gross yield but better net yield as there is little cost.