We purchased an apartment for investment which is due for delivery soon in Broadbeach, Gold Coast. We have 2 options which is to furnish it and to have it let as holiday apartments or permanent rent (typicaly lease period of 12 months). We are not sure which would be the better option. The outlay for the funishing will cost 20k and although there will be guarantees on appliances for the first year, future costs damages/replacements are the owners’ responsibility. However, rental is guaranteed for the first year. The unpredictability of costs makes us worried and the significant initial outlay is also troubling. Although rental is higher, i cant see how we might recover the initial costs.
What are your views on this? Also will it change the saleability of the apartment in years to come? Are investments in the Broadbeach area a good idea, although it is too late for us to back out
Thank you.
Hi Harv,
Have you looked at the differences in incomes between long-term lease and holiday letting? If the latter, is there a property manager who will look after the renting of these, or is that up to you?Have you looked at the likely percentage of “filled weeks” versus “unfilled weeks” if holiday letting? Though it is nice to perhaps make twice the rental via a holiday let, it pales somewhat if only let for 50% of the time. Still, that does leave time for YOU to enjoy it, if that were a likelihood.
Broadbeach is part of that Surfers area – personally, I prefer the more outlying beaches (e.g. Burleigh Heads). It being in Broadbeach should make it desirable to those who are working in the Surfers area, as it is far enough away so that they leave the hustle and bustle behind them after work. It is also near to the Casino – could THAT be a drawcard for your place?
One reason I have never gone into that area is that your apartment will be “just one of hundreds” – like a Taxi, you can never get enough of them in peak times (same with apartments during School Holidays) but what about the rest of the time? What is it about your apartment that would make it desirable outside of School Holidays? If you struggle to find an answer, maybe a long-term lease is the way to go.
Good luck with your choice, Harv – I hope the final days all work out and you soon have your apartment,
Benny
Hi Harv
I have to say the wording “is due for delivery soon” in your post makes me very nervous.
I am assuming from this the property is an off the plan new property ?
Firstly, I hope the property values upto the purchase price as more and more are not and secondly sounds to me with a rental guarantee this has been built into the price itself.
Do you have to rent the property thru an onsite manager who has purchased the management rights ?
If this is optional you may find renting it thru a local agent might be preferable.
The furniture will be Tax deductible so that is something but how regularly will you need to replace it.
Will your landlords insurance policy cover any damage to the contents ?
I think the first thing i would do is make sure your Bank or Broker order a valuation as soon as the unit has been completed as this could be the initial problem.
Then talk to a few independent property managers in the area and get a feel for what they say.
Broadbeach is a good area but starting to see more of an abundance of high rise OTP units and they are not valuing up.
Cheers
Yours in Finance
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Thank you Richard and benny for your replies.
I have thankfully received valuations which is the same as the purchase price and all being sorted in terms of mortgage.
Yes onsite managers have purchased the rights. And they could manage the property either by letting as holiday apartments or as typical permanent rent. They are only providing guarantee if on holiday rent as they are very confident that letting as holiday apartments would not be a problem.
They had not mentioned about insurance for the furniture.
The initial outlay for furniture and fittings is not sitting well with us given the uncertainty of future costs.
Broadbeach was when we bought we understood that It would be attractive to working professionals and small families. Broad each is away from the touristy areas. I note your views and most grateful. However, We are already committed and we will hope that this investment pays off in the future.
Thank you again.
Hi Harv,
So, had they provided numbers on “expected rents” or “Expected holiday letting returns”? Costs for body Corp? Costs for Holiday Let mgmt? etc?A quick look at apartments in Broadbeach (out of interest, after reading your post) saw a range of rents from $400 to well over $600 a week. Prices of apartments had a huge range of values from $350k to $900k+.
The Median Value for Broadbeach 2Br apartments was something like $420k with a 4.9% return (so, median rents of about $395/week). Are they similar to the numbers you were given? Of course, the yield is Gross – so all expenses yet to come out.
Benny
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This reply was modified 9 years ago by
Benny.
The guarantee sum is 520 net for a year. Body corporate and insurance and council rates borne by me. Other than that we pay for finishing the unit which comes to about 20k. They are able to provide the guarantee as they explained because they are confident of the holiday rentals happening at least at 70 percent occupancy.
When we bought the apartment there was no discussion of such packages and this gives me comfort that the guarantees are not part of the purchase price. Also they are leaving to owners to choose. There is no guarantee if we go with the permanent rent route.
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This reply was modified 9 years ago by
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