Hi,
I’m looking to get my feet wet in property investment and I’ve done some research on the types of dwellings to invest in. Given that I have zero equity in anything, I’ve limited myself to smaller properties for the first round.
To that end, I have been looking at the serviced apartments end of the property markets and given the obvious assumptions (positive returns, occupancy rates, furnished/unfurnished, irregularity of said cashflow etc.), does anyone have any other experiences with micro-properties? Things to look out for? What about the irregular rental income?
Any information will be greatly appreciated. Thanks.
Damo
No experience with serviced apartments, but if you do decide on serviced apartments then check your bank is actually willing to lend money on them, some banks are a bit wary of these.
Good Luck
PKGenerally you can only borrow about 65% of the pp on these, and then count only 60% of the rent, if you have no cash these will be really tough to buy.
Also as it is an investment only property, FHOG’s doesnt apply, so for a $100k pp, you will need probably 45k in cash, (35k deposit and 10k to close)
Pete
Hi,
Thanks for making this good and interesting post.
Generally speaking, I am not a fan of serviced apartments as they are more of a solution than they are a problem.
Practically, this means that it is the management agency that stands first in the profit queue by charing a (usually) above-market rate to run the investment.
As for positive cashflow returns, just be on the lookout for hidden costs and unrealistic growth and other projections used to smooth over the figures.
You may actually find that it is cheaper to pick up a second hand serviced apartment than to buy a new one – so i’d be investigating that angle.
Finally, I urge you to consider the uniqueness of the investment you may be acquiring. It is scarcity that drives growth, so there needs to be something identifiable (beyond the usual marketing blurb) to flag your investment to achieve above market returns.
Thanks again for your post and welcome to the forum!
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
And beware of anybody quoting 4% (vs 2.5%)building depreciation allowance on these properties (and on holiday units) based on the interpretation of ‘Short Term Traveller’. I went to an AIQS (Australian Institute of Quantity Surveyors) and ATO seminar last week. The ATO said this is something they’re on the lookout for.
I’ve got an Interpretative Decision from the ATO on file if anybody wants to see it.
[email protected]Hi again,
Thanks for the valuable information. It’s been very helpful. To clarify on some of your responses, yes, I am looking at second-hand apartments (ones which have a ‘proven’ occupancy rate). Having said that, Steve’s on the money with the hidden costs. When inquiring about management/outgoings, not once (out of 6 attempts) could I get a straight answer on the figures.
To that end, I’ll still be keeping an eye out for other types of investment properties.
Thanks again from a forum newbie.
Cheers,
Damo
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