Forum Replies Created
what area???
let me know how it goes!!!!
desk top
thank you michael for all your advice, appreciate you taking time out to inform me.
i have talked to many other investors about serviced apartments and most say the same thing. “stay AWAY”!!!!!! everything you have mentioned makes complete sense now.
not having had alot of investing experience in property my first attraction was the rental return. “LONG TERM LEASE” “HASSLE FREE”!!!
i thought that having a long term lease in place with one client, no out-goings and rental increases no management fees sounds too good especially if you’re looking for high yield %….
however looking closer into the agreement there is very little room to move for the owner…the tenant has all the control and they have very easy ways out. ie, simply by not paying the rent can default the lease agreement!!!!!!!! or a letter stating they are not renewing the further 5 yr term. then what???
i do thank you all again for your comments and advice.
the one thing ive learned by reading steves book is ask yourself one question when investing in property:
“What are you buying for? and how do you intend on making money from this investment”?
positive cash flow – earn money from day one?
negative gearing – cost you money now for possible capital growth in the future??Why did you buy these investments in the first place? i presume capital growth, which most people do.
i do recommend to spend a little money on renovating. ive recently spent 10k on renovating one of my investment properties and it added a 30 – 40k to the price. doing simply things, change carpet, a major paint job..changing all light fittings and light switches, door knobs etc…makes a huge differnce to the appearance and therefore value.
if you want out of your second investment, the best advice is spend some money on upgrading. it goes a long way, and hopefully you receive a good price to pay out your loan.
hi derek,
have you had any experience with such property investments? or do you know anyone that has??
thank you everyone for your advice.
ive looked into the contracts for a number of serviced apartments in the melbourne CBD. the deal usually is this.
terms are 15 – 25yrs with annual increases. however:
each term is based on 5yr only. thereafter the tenant (being the hotel chain) issues a rental notice before the end of the term to stipulate the new rental rate. very true, no garantee that it will go UP!!! you can dispute the new rate however then you must pay for an independant valuator to determine the current market rate!
i also found it interesting that both the agent or the manager of the hotel chain couldnt answer a simple question, “what if they dont renew for a further 5yrs”??? this is my major fear. it will be very difficult to rent the apartment out, and if you did, would receive such a low yeild competing with all the other major apartments nearby. the only reason they suggest for not renewing would be if another hotel chain took over the whole complex. does that mean they will take over all the existing lease? if not, will they want to negotiate another deal?
there is nothing in the contract regarding spending more money in the future for furniture. the deal is that they (the tenant) will pay for all maintenance and if they replace anything, they will own the new item.
i am really interested to know why the hotel chains dont buy the apartments themselves. why on earth would they sell the rooms off to private investors and then lease them back. doesnt really make much sense.
very interesting comments and im still interested to have my lawyer look through the paper work more carefully.
its obvious that these apartments will attract very little if any capital growth and that you’re limited with what you can do with it. the only aspect that is attractive to me is the ruturn and no out-goings, and if you can receive annual rental growth. however the down side is that you only really have one client, and if that client falls, i believe your investment will be worth very little.
oh and the hotel chains are “Quest Apartments” and “Pacific International”
thanks jo
btw Jaffasoft, i really like your property calculator….fantastic idea
I do like the idea however I was not aware that such investments are hard to find Finance for, like Terryw kindly pointed out. I like to know people that have invested in similar apartments to make me 100% confident….you can never get enough info
Desk Top
$400 p/w would be a great return if he can pull it off.
The apartments I have been looking at are with established hotel chains. You would be bound by an existing lease agreement and the property is managed by the hotel. Your income is set in the agreement with annual increases. The thing I find attractive about these kinds of investments is you dont have to worry about finding tennants or worry about maintenance costs etc… You buy the apartment with a long term tennant in place.
7 – 8% Plus Nett ruturn is not bad in my book, hassle freeDesk Top
hi russ…thanks for the tip. im not sure what OPM means, can you please clarify?? buying 2 smaller IP’s are you suggesting that they should be positive cashflow properties? im not sure if the combined rent would equal the amount i could receive for the one larger IP property. perhaps if you look for properties with higher potential capital gains?
desk top
hi..not sure who you’re after..
this is desk top from melbourne
thanks simon, appreciate the options you are suggesting.
Simon said:
“They lend 65% of the total valuation which covers them if they need to sell the property to pay the debt”will they ever lend 100% of the value of the property, and then use the 2 properties as security to recover the debt??
desk top
very good question…..i would also like to know how lenders manage unemployed clients with equity.
desk top[suave3]
thanks chan dollars
appreciate everyones comments
desk top[suave3]
i havent lived in it however ive been told that if you sell after a certain period of time, you are not subject to capital gains. ive owned the property for over 16yrs.
desk top
im confident that i will be able to make the repayments, and i wont be un employed forever! id would much rather look for another IP now rather than later. out of curiosity…if i did sell, will it be subject to capital gains??
desk top
thanks kay henry – what kind of smaller properties do you recommend that will return a higher yield? i was thinking if i could hang on to this property, seeing that im still at home and my outlay is low, i could use the equity to service another “positive cashflow” IP. im yet to find a property that can return a positive income, (but still desperately looking!).
however, if i did sell the property, would i be subject to capital gains? ive had this investment for over 15yrs.
cheers,
desk top[suave3]hi mel
thanks for the advice, appreciate it. looking like i will find new tenants and rent it out again. after my renovations, i should be able to get a higher return.
i will also take up your advice and talk to a mortgage broker.
cheers,
Desk topthanks for the advice…..
not really familiar with wraps and how they work. have only read about the concept. also, im not sure what you mean by 20k per month???
desk top
