Does anyone have pre-approval to buy student accommodation off the plan?
One major has stopped financing these e.g. LVR: NIL. One of the other major banks is reviewing them. If you have pre-approvals you want to make sure they don’t expire before settlement…
Will also cut out some potential buyers for anyone trying to offload them.
Whats the reasoning? Is it banks or does this now flow on to super funds/equity investment groups etc as well…..I'm wondering if that then flows on into construction funding for uni accomm also.
If the market turns to custard these sort of properties are the hardest to sell. The secondary market is weak as you can always find a new one ( why buy something a few years old – miss the depreciation etc). This makes it hard to recover your money if you sell.
The value of the property / and potential rent is reliant on international students amoungst other factors – they are also reliant on a boyant investor market where property suitable for owner occ is not.
Default rates are on their way up ( due to rate rises). These properties are yet to be tested in a bear property market.
Crap properties… In my opinion….
Interesting.. and good perspective to have. I know there are some big educational precincts planned around the country and some uni's spending big pesos on upgrading or installing new accommodation blocks..I know about these ones first hand so to speak. One was funded privately which I found interesting..big bucks too. Another one going on is looking at the $60Mill mark for construction, so there must be someone seeing something out there…
Personally I wouldn't own them either. but thats purely a personal thing.
Hi Banker
The property I just recently bought was student accomodation, alot of these properties have a 'lease back' arrangement where you have to lease it back to the Student Living Management Group.
I made sure that mine wasn't apart of this arrangement, what this means is that I am able to move in if I wanted to.
The issue we had with CBA was that they would only be lending us 70%, apparently they would not be leveraging at all.
I am now in negotiations with ANZ, they have recently lent out 90% LVR to a few people purchasing student accomodation.
Thanks
Andrew
Common problem on the financing side and I've encountered it with CBA too.
However the reasons Banker was giving about why not to buy them is also the reason I am jumping on as many as I can get. ie Hard to sell on the secondary market so you can negotiate VERY hard and pick up bargains and (so far) always be positive cashflow. I just always avoid any of the super small student units, I have no end of bad stories about them (I'm looking at you Unilodge!)
Hope that helps,
Andy
So Andy, are you saying you buy student apartments cheap on the secondary market rather than new?
It kinda confirms why not to buy them from a seminar / one stop shop property investors club type outfit. I’ve seen them sell up to 40% under original purchase price. I guess from your point of view they could be a good investment.
Good buy for the suckers that buy them new…
Good bye to their money that is…
Exactly right Banker,
usually I'm buying them after 3 to 7yrs where the owners just can't make the numbers work and these 'great cashflow properties' are costing them still every month. So far been sticking with larger properties (4 brm) but hoping to have a contract soon on a nice 2brm that I couldn't walk past (assuming the bank will play ball for the $20k I need!).
I honestly can't imagine buying them new unless I was to develop them myself.
Cheers,
Andy
(ex-Banker)Yep the one we snatched up was 3 bedrooms right in the heart of the CBD and right across the road from 2 universities.
The main thing that we had to look at was to ensure it wasn't a leaseback arrangement – this make selling very hard
As long as you dictate who you want to rent it out to or even if you want to move in yourself.
Banker,
which were the banks pulling out of student accommodation? If you don't want to post, can you PM which ones?
thanks,
Matt.Last I heard Cba were out e.g. Lvr NIL. Westpac were saying no and ANZ were reviewing there position. Maybe someone else can answer.
Hi.
I recently apply for finacne for a client , who bought a 21 sqaure meter student accomdation – mind you it was NOT easy- but we got there eventually.
Currently CBA no longer offer this product as of 01.07.2010- ANZ is also pulling out from this product, but since i deal with student accomdation on a regular basis i find they do accept them on a case by case ( but it's no easy feat)
Prior to the GFC, student accomdation was not a real issue in term of finacne. but since then- it's a No no for Most if not ALL the banks. you will only find finacne for student accomdation if it's bigger then 40 squa meters and must be self containted. Another wise you will have to go through a Private lender – and rates are generally 2-4% higher then standard. and different terms and condition depending on the ledner and the property .
Regards,
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
You can still fund student accomodation, just the options have reduced. We got an approval on a bulk purchase earlier this year of over 30 in one hit on pretty reasonable terms, and havce financed some individual ones recently without too may issues. It really comes down to the strength of the borrower.
Regards
Alistair
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