All Topics / Help Needed! / resort room units

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  • Profile photo of cloud10cloud10
    Participant
    @cloud10
    Join Date: 2003
    Post Count: 1
    December 25, 2004 - 11:46 pm

    I’m am very new to all of this. I have just finished both of Steve’s books and have come across an opportunity that looks like a winner to me (with my limited knowledge + experience….). I was planning to educate myself for a few more months before dipping into buying anything but this one came up…..

    Motel room units in a resort complex of 96 units for $100,000 with a 12-month 7% guaranteed net return (after rates, body corp fees etc). All totally refurbished – nothing else to do. Under new (proven to be capable) management. Any advice – positive or negative, warnings etc would be gratefully received.
    Many thanks,
    Jayneee

    Profile photo of Robbie BRobbie B
    Member
    @robbie-b
    Join Date: 2004
    Post Count: 2,493
    December 26, 2004 - 3:55 am

    Various issues arise with these types of investments. A few of them include:

    • Lenders are not keen on hotel / motel conversions and will either not lend on them or lend very little against the purchase price. There are some exceptions. You WILL face problems trying to finance and / or refinance them.
    • The size of the units are often well below minimum requirements sought by the lenders. If they are less than 25m internal measurements, I would not touch them.
    • Renatal guarantees are only as good as the company giving them and the amount they guarantee is usually worked into the sale price in any case. Also, you need to consider what happens when this guarantee period ends. Rents will usually drop off dramatically.
    • These developments are often dependent on tourism and can result in cyclical returns.
    • In agreements for developments like these, you may be required to use the onsite property manager and will not be allowed to put a normal tenant in, find a tenant yourself or move into the unit. I would be checking this.
    • Mortgage insurers will not touch these so the maximum you can borrow if you find a lender who will do these is 80%. There is the odd exception if you are allowed to live in it and the size is right.

    Robert Bou-Hamdan
    Mortgage Adviser

    0414 347 771
    [email protected]
    http://www.mortgagepackaging.com.au

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    Comments made are of a general nature and should not be construed as individual advice.
    © 2004 Mortgage Packaging Pty Ltd

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