Hi, I have been looking at IPs and came accross this new development. There is a hotel section in the building from level 6 to 13. Apartments on these level are going between $214K to I think $239K. The deal is that a hotel will rent out the apartments for the next five years with a return of 5.5% Nett and thats guranteed. The tenant (Hotel) will pay all other costs. There would be a 3% annual increase in the return. After the 1st 5 years there are further options for 15years to rent it out the the hotel. It is due to be completed in November this year. Apartments are on sale now (save some stamp duty – not the whole amount).
I don’t know much about inner CBD appartments, but this thing looks very lucaritve. I have enough equity in my home to get 100% loan for one of these appartments. If I take the total amount on loan, the interest only repayment comes to about $1300 per month wheres the income would be $1000 per month (an out of pocket of $300).
Could someone give some light on what things I should be careful of? Its a one bedroom fully serviced and fully furnished apartment.Dont buy it.
I cant see you doing well out of the deal. there are appartments everywere in the city, what is so good to make it a good deal if you are loosing $300 a mounth. Remember that this property is the best it will ever be when you buy it off the plan so it can only go down in value, unless there is some capital growth in the next few years. Look at buying property that is under valued put a bit of an effort in and you might achive some growth just buy value adding. Appartments in my opinion will loose money over the next 5 years. Be careful, there are a lot of propertys to make a little money on , but to buy a property that is brand new the only way to make money is capital growth and that has finished for city apparments for awhile.Cheers Rick
Monopoly, my favourite game
Don’t buy it.
It is a serviced apartment,and not a very well performing one at that.I just sold a serviced apartment in Southbank that I bought in 1998 for $188000.I was getting 7.5%net return,so it wasn’t costing me anything,but I only sold it for $11000 more than what I paid for it,and that took over twelve months to get a sale.If you want a hassle free investment then they are great…no outgoings to pay,no maintenance,no vacancies……but no capital gain!Tools
If you must have a serviced apartment,there are cheaper ones around offering better returns….
hi dkram
I also don’t like it.
a what hapens when the hotel moves to the next new building and your left with a room.
b the return is very low for this type of investment usually it should be a commercial return 10%
c which is the main reason why I wouldn’t buy it is you posted,I don’t know much about inner CBD appartments. if you don’t know don’t invest is my opinion.here to help
Think about who is guaranteing the 5.5% yield…its probably a $2 shelf company that can disappear overnight.
How do you think they can afford to make this claim…by loading up the sale price!!
Thank you very much everyone who replied. You have made it easy for me to make the decision. Once again. thanks a lot.
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