Should I buy an inexpensive "student apartment" as investment

Thank you all for your comments and suggestions. It all helped me better assess the situation.

Just out of curiosity though.. If these apartments are such poor investment, who is buying them? I mean they are not all for sale so someone own them? Is that solely for negative gearing purposes or something of a kind?

Cheers

 

People like you who didn't ask the questions.
After buying it and realising it didn't work as well as expected, they continue to hold it as as letting go would be admitting they screwed up (in their mind)

Or those with more money than sense.

 

That makes a whole lot of bad investments

 

I believe some people are so desperate to get into the 'market' they are suckered in by the price and lack of DD. Maybe its lack of deposit or common sense.
Ive seen it before with smooth talking agents/brochures and units and high body corp.
Pretty sure it was on the news and andrew wilson plus antonio (REIQ) talking it up as a great oppurtunity.. couldnt stop laughing..

 

also those who send their kids to the big smoke or overseas to study

 

Not sure if this is still relevant with your plan leaving the country soon.
I have both student accomodation investment and AREIT investment.
Sort answer is no, go with AREIT instead.

Long answer:
If you want to invest in property market but going to be overseas and looking for some passive income, look into AREIT (Australian Real Estate Investment Trust) funds like APN AREIT, Vanguard or others.
Yes they invest in shares but only in the property industry.
You would get monthly distributions and you can automatically reinvest some of it back to grow your investment even further.
The return of investment at the current time of writing is more than 6%.
Your monthly distribution is always the same per unit owned.
I personally feel this is much better than owning a student apartment or a small office block or anything similar.

With rental properties the return might not always be the 7% that they say because rent goes up and down as well as interest payments, managing agent's fee, advertising fee, contract signing fee, repairs, utility bills, strata fees, and any unexpected expense. most of these expenses usually only go up, and rent is becoming more competitive that you need to reduce it.
The 7% is usually calculated using the gross rental divided by price of property. Because there are also the purchasing costs, and regular outgoings to be calculated. Then you end up with 3-4% net return. less cash in your pocket.
Your money is stuck there and it's not liquid.

But with the APN AREIT fund I mentioned, it goes up and down slightly depending on the unit price, but you get the same income every year per unit.

Calculation if using all of your $200k:
You would get 116,686 units
0.869 cents distribution per unit per month = $1014
and if you reinvest say 50% of this, you'll get $1019 next month and it keeps growing

You get capital gain too from the increasing unit price.
And your money is liquid, you can withdraw some or all anytime and you'll get it in 3 days.
All electronic statements, yearly summary for your tax return. No need for profit/loss statement and balance sheet, expense record etc as you would for rental properties.
No headache, easy tax return time.
no entry exit fee, only 0.85% management fee as opposed to 8%-10% in rental properties

That's just my experience in the last 8 years with both type of investments. I'd choose AREIT anytime over most student accomodations.

Hope that helps.

 

Hi and thank you very much for the elaborate explanation!
Much appreciated