studio apartments /1 bedders

Adrian, a shoebox is a shoebox (studio <50 m2), you will find that banks find it difficult to lend against. These are often converted ex-hotel rooms and have a very transient tenant. Sometimes these are best let as furnished due to the short tenure/high turnover – best if you can do an executive type rental in desirable locations eg city digs for weekdays with the tenant going back to their house further out of the cbd. Short-term rentals are usually not worthwhile as the agent takes a hefty fee + items such as cleaning & higher level of maintenance eat into returns making it difficult to be +vely geared. I have a mate living in Perth cbd, 100m from the office/gym/restaurants, spends minimal time at the unit (12+ hour days at the office x 6 day week), monthly flights back to Sydney as a typical user.

1 bedders are a totally different scenario. Usually larger >50m2 up to 70 m2 + parking. Tenants are mixed – singles who have outgrown a sharehouse, newly single who have furniture, first time out of home (under parent supervision), downsizers (retirees/widowed). Provided you buy in a key location (near shops & transport) there aren't too many issues in getting tenants. Proximity to schools isn't a priority. The key to keeping one of these tenants is presentation, maintenance & affordability. If I have to move out of home for work (contracts), I seek out the best of the 1 bedders available, although I will do the share house thing (2 bedder) if it is going to be short term contracting away from my base & I have local contacts.

Adrian,  Studio apartments in my neck of the woods generally come under the holiday let which  – for me anyway – is a good enough reason to give a wide berth, however the headache you will have to go through to even try and  get the money for a studio is a another very good reason to keep away. The resale factor down the road when (if you ever do) you want to sell is the third reason, as the prospective buyer will have to go through it all themselves. If you do manage to find a lender and you can get it leased as long term (6 to 12 month leases) then the yields can be rewarding, however bear in mind the capital growth will almost certainly be minimal. I am on the Gold Coast and while now i do not advise any of my clients to buy studios I have been involved with them over the years and i can tell you the tenant (on the gold coast anyway) is likely to be  transient in nature, single and probably spends more time at work and out socialising more than living in it and not being in position of owning very many worldly goods- studios are almost always furnished. This can sometimes lead to tenants not keeping up with rents and being in a position to disappear into the cold dark night without too much trouble.

One bedrooms are again not what i would advise for everyone, but they are certainly a big improvement on studios, the size factor is a big plus, it will be over the 50sqm and could even have secure parking. Generally speaking a one bedroom can be rented to all walks of life including young professional couples, the elderly (ground floor is good), singles and separated couples looking to find their feet again. A good sized well proportioned one bedder can be a real jewel in a portfolio and i know of  at least one investor who buys nothing but one bedrooms, and as his plan is never to sell than it works for him.

just bear in mind those big yields you see are generally gross figures so take a bit of time and get all the costs before signing anything. Body corps are horrendous in buildings that have holiday let leases and even if you can do a long term lease you still are liable for the same body corp fees regardless. Also long term lease management fees will should be around 7.5% plus GST as opposed to 13% plus GST plus cleaning fees and more for the holiday let..

I had some studio apartments located in Cairns offered to me to market for somebody not so long ago ( which i politely declined). They had unreal expectations of what they were worth and after looking up the sales in the complex, in which 16 had been sold in the last six months- again, not a good sign, the average capital gain had been after four years,  less than four percent. I am afraid I do not see that as good investing.

The main thing is Adrian, which ever way you go do the homework first and try not give in to the urge to buy something purely because it is affordable,

Hi Sam,

As I mentioned I am not really a big fan of one bedrooms, however I personally would look at a smaller block as they tend to – not always  – have a smaller B.C. and I feel a better chance at resale, if you were to sell to an owner occupier I feel they would prefer a smaller block. As for O.T.P. verse second hand, I am a believer in second hand markets have established them selves, O.T.P properties haven't and also lots of headaches involved and Body Corps can be a little misleading, or perhaps a better term is they can require some "adjustment" after all have settled. Having said that i am sure there are plenty out there that would much prefer a new property for whatever reason.

I would believe it would be very easy to rent a unit in a residential area of owner occupiers and in fact would be preferable, as for 1 bedders grouped together, here on the Gold Coast it can lead to unsavoury situations, but I don't know Perth at all so can't really comment too much.

Hope that helps.

STAY away from studio apartments ……. or at least make the offer subject to finance.  They are chep for reason …. an d the reason is BANKS hate them.