Hi I would love to hear from someone who has bought a serviced arpartment and there oponion of them. The one I’m looking at is in the centre of the CBD. I was told it would be rented for 18 years and was also told the growth would only go by CPI. It is great to know that I will have permenant tenants as I only want to use it as investmnet purposes only. The cost of it will be around $140.000 but I was told by my agent that with the last 2 years annual return figures it should be priced at $180,000 but the owner lives in singapore and has no intention of coming back to Australia and wants to get rid of it. Also it has a rental gurantee of 4% of the sale price which should be $180,000. Know I’m only a novice in this investment business and I’ve been asking people opinion on there thoughts regading serviced arpatments. Just to let you know buying the serviced arpartment I actually purchase the strata title so I own the apartment once the lease is up.
Hi Darth,
I looked at a one-bedroom serviced apartment in Brisbane CBD with avg 15% return about a month ago but the problem was finance, not feasibility. The apartment was under 45 m2 living area (ie excluding balcony & carport) and hence no one would touch it. The other major hassle is that if you do find one big enough the banks are still v v reluctant as so many things can go wrong – eg owner HAS to replace the furniture, fittings and fixtures (eg carpet) every 3-5 years otherwise they won’t let it out, rooms get trashed and owner and management team have a falling out over who’s responsible and then they just don’t put people into your room, capital growth is often zip because of the lending restrictions hence the buying market is generally those with lots of cash (eg Singapore investor) but even if you have the cash, you’ll have trouble borrowing against the asset to use the equity elsewhere.
Every opportunity is different but this all certainly turned me off despite the whopping potential cash returns. Would be keen to hear others stories. [
]Happy investing,
MelThink it really depends on the style of the serviced apartment. We looked at one about 18 months ago in Canberra. The figures looked great. The place was leased until 2007 with 2 x 5 year options afterwards.
But when we looked at it, it had no kitchen. It was just a one bedroom unit (similar to a motel room).
So – our thoughts were what do we do with it afterwards? We couldn’t realistically rent it privately and would be [effectively] forced to accept whatever company tendered for the hotel.
Even the real estate agent didn’t have an answer for me – all he suggested was that I lower the offer (which was no help).
As I said – I wouldn’t NOT buy one, but I’d be very careful about doing so (and would want a significantly better RoR than I can get with a regular house and land with capital growth coming in).
Hi Darth,
We bought a serviced apartment about five years ago in Melb.(Williamstown). We bought off the plan for 190K. We have had no problems with it, but at this time a 10yr with 3x5yr option lease was already in place. We get rental increase of 4% each year and have just had the apartment valued at 320K. The only problem we have found is that the banks are reluctant to loan more than 70% of the value. Otherwise it has been a good investment for us. It is also leased to a very reputable accom. firm.Just another opinion.
Be very careful and do your research.
TheresaMelay has hit the nail right on its head, it is difficult (but not impossible) to obtain finance for a one bedroom unit under 45 sq. metres.
Also, some lenders would see problems with a serviced apartment. So if it can be rented out privately you may overcome this lender’s objections in this regard.
Often you are able to buy such a serviced apartment without being obliged to rent to the company who runs the serviced apartment business.
Pisces133
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