Forced into early retirement, considering investing in serviced apartments to generate cash flow

Hi all, I'm completely new here and need some advice. I'm 35 and after a pretty serious injury I am now retired. I received a large settlement and I'm trying to figure out how to set up an income stream to last me until I hit my super in 25 years.

Currently my house is 100% offset with 400k sitting in the offset account. I have 500k in cash. I have $0 in income. Half of my settlement went into my super so I'm sorted once I hit 60.

I've been looking at various entry level properties in Melbourne CBD in the 200-250k range with the goal of getting 2 and living off the rent. I won't be borrowing anything, just using cash and taking what I need from offset to get these assets off the ground. I've been looking at small studios, NRAS properties, student accommodation, Stayz / AirBnB type properties and lastly serviced apartments. After doing numbers on all the above, serviced apartments seem like a good deal. too good actually. After a bit of digging around the main drawbacks that I came across were:
- poor capital growth
- difficulty selling
- difficulty obtaining finance
- risk of the business going bankrupt

is there anything else i'm missing? despite the negative press I find myself still drawn to them. I am in a unique situation so i think a lot of the drawbacks don't effect me. i'm not interested in capital growth, i'm just looking for a high rental return from the get go. I don't think i'll be trying to sell them. i won't be seeking finance. bankruptcy is a concern but i'm hoping CBD properties are more immune to that. I wanted to check on here that even if all of this is the case, i'm still not making a mistake.

the normal properties i looked at in the city returned 4-4.5% after costs, student accommodation can be 6-6.5% but seem like a real headache. The serviced apartments i'm looking at return 6.5-7% after costs. for example, one of them is listed at 255-275k, returns 18907, only outgoing is a sink fund of 980 per year for a return of 6.51-7.03% depending on purchase price. they have annual cpi increases and no other outgoings or management fees. i also think i could haggle down the price a bit considering i may not have much competition.

my thinking (self justification) on this is a normal property will gain those few extra percentage points (and most likely more) once it's sold and capital gains is earned. a serviced apartment is front loaded with a higher rental yield, and you pay for it when it comes time to sell as it is difficult and you don't gain much then. is that a fair assessment? have i fallen in love with magic beans? should i forget serviced apartments altogether, stop being greedy, and buy a normal property?

what a massive first post. thanks if anyone is still reading. i'd really appreciate any and all input. i'm looking to do something before eofy and i need all the help i can get

 

What sort of yield are you seeking, gross and after all expenses?

 

can u borrow? Without an income probably not. That would mean you are looking at investing in unleveraged property.

I think you could do better to avoid this.

 

Maybe a house where you rent by room? Otherwise you can go for shares but 500k won't get you far. I'm thinking maybe you should go and live overseas.....

 

It will be my sole income so the more the merrier but I'm targeting $2500 per month / $30,000 per annum

 

What alternative do you suggest?

 

I would suggest you seek financial advice.

 

Ha, yeah I'm actually thinking of doing that after a couple of years, that way I can rent out my home as well. But for now I want to set up a situation where I'm able to live off rent alone so I'm not digging into my offset just to get by. It will be tight but I live cheap anyway, I think $2500 per month could do it considering I have no rent/mortgage costs, no children, and the world's cheapest car

 

Wondering. .. can you pull that money out of super as you are actually retired now? I'm just doubtful you could live off the cashflow 500k generates.

 

Thanks Terry. I might just do that. I met with a couple last year but got scared off by their fees. One of them was 5k upfront

 

It's tricky. I've looked into it and made a few calls. Basically it's up to the government to make the decision on early access (even for medical reasons) and it's means tested. So I don't qualify because I have a bit of cash

 

I guess I could blow through the 500k and then request early access to my super

 

If you aren't able to work at all until you are 60, then do you qualify for a sickness benefit?

 

I do but it's means tested so it gets zeroed out

 

No need to pay that much. You could do your own research on this forum. I can't make any suggestions but you can do much better than property.

 

Anyone have input on serviced apartments? Do they return as highly as they claim?

 

Huh, ok. I've only thought of property as it's so tangible. Maybe I should branch out my thinking

 

In your situation, I'd probably dump the lot into a few index funds/LICs and done. I would NOT go down the IP route.

 

Sorry, I'm behind on the acronyms, what are LICs and what is IP? Feel stupid as I've seen IP everywhere on this site

 

I think you could live comfortably in any country in south east asia.... with that amount of assets.... Thai and Malaysia's private medical service is quite high, and cost of living is low.