Good Day to you all,
Im a relatively new property investor and im looking a buying two investment properties in the next few months the only thing thats holding me back is the realization that i do not have enough knowledge to ensure i make quality judgements each and every time.One question i have is about city apartments for example buying a hotel apartment and then leasing it straight back to the hotel. Now what i dont understand is why these apartments would be for sale in the first place does the owner of the hotel chain know something i dont??
Also i assume a property trust would be established for tax purposes and i have read in other forums of other benefits such as asset protection so it seems logical that i establish a trust but is this really the best way to go about things what other options do i have??
Now i have one more quick question today and thats if anyone can assure me that i can still find a positively geared property without buying a unit block that needs renovation, i have found one property that i would deem a decent investment its in the CBD and its $110,000 and return $11,000 in rent last financial year what do you all think
Any feedback is greatly appreciated
Thankyou
Lease back apartments are generally considered not that good an investment.
There is virtually no ability to add value, the management company can be the make or break for these places insofar as they may not rent out your place, and if the rents aren't pooled, then you could have a lot of vacancies.
They tend not to have a lot of cap gain.The purchase structure varies from person to person and situation, so it is advisable to talk to an accountant about this aspect.
The cbd property you mention sure has a great rental return – 10% which is unheard of these days; especially in cap cities, and my scam antenna is up.
My big concern would be the 'holding costs' for this place – what percentage of the rent will be eaten up by things like rates, body corp, insurances, any "on site" management costs etc.
If it is in a larger apartment complex, you may find that the body corp fees for things like common area maintenance, lifts, pools, gyms etc will be very high.
I anticipate that around 15-20% of the rent on my properties will be eaten up by holding costs, and this includes 4 weeks vacancy per year.
Do the numbers on these costs for that property you have seen, and if it is over 20% (including 4 weeks vacancy) then it is probably too high.
Yeah, don't touch serviced apartments, purpose built student lodgings and most studio apartments.
They appear to yield higher to make up for the high fees and lack of CGT. You also need a much larger deposit as the banks don't like them either.
They are targetted at naive investors who think that they have discovered something new. We have all been through that phase.
Cheers,
Thankyou so much guys this is why i have always loved this website this isnt the first time people like yourselves have saved my behind
can i also ask where i should look for info on where to buy within my own city what does the astute investor study and readThanks again guys
RVP wrote:One question i have is about city apartments for example buying a hotel apartment and then leasing it straight back to the hotel. Now what i dont understand is why these apartments would be for sale in the first place does the owner of the hotel chain know something i dont??The reason they do that is by selling the apartments, they generate extra revenue which they use to build more of these hotels or other developments.
There is nothing wrong with buying one of these provided you buy the right one. A lot of the new serviced apartments offer much more flexibility in terms of how you want to manage it. There are those where you buy the apartment off them and they give you a fixed rental guarantee and your stuck with for the term of the lease. These properties tend perform pretty poorly in terms of capital growth.
Then there are those which you can either let the management company manage it for you, manage it yourself or give to a property manager which you can rent it out as long term or short term or you can live in it yourself. The good thing about these type of apartment is that you can lease it out as short term (holiday) most of the year and then go live in it for a few weeks when you go on holidays.
Quote:Also i assume a property trust would be established for tax purposes and i have read in other forums of other benefits such as asset protection so it seems logical that i establish a trust but is this really the best way to go about things what other options do i have??Trust is good if you're at risk of being sued otherwise it could be pretty costly. Trusts like Family Trust I believe you cant claim any tax benefits such negative gearing so there is no point in getting that unless you own the property outright.
Quote:Now i have one more quick question today and thats if anyone can assure me that i can still find a positively geared property without buying a unit block that needs renovation, i have found one property that i would deem a decent investment its in the CBD and its $110,000 and return $11,000 in rent last financial year what do you all thinkI would assume that it's a studio as you cant find such a cheap property in the CBD anymore. CBD strata levies are usually high so make sure you dont get stung by that as it could eat up most of your rent. Also with studios there isnt much capital growth so it might take you longer to accumulate properties since you wont be building any equity in the property in any hurry.
Thanks for the sound advice Masih its greatly appreciated
can i also ask where i should look for info on where to buy within my own city what does the astute investor study and read
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