Thanks for your contacts and advice Greg, I thought I’d share my reply to our PM with others…..Since a week ago I have learned so much and I have gone off the idea of buying into serviced apartments (off the plan).
I came to the conclusion by reversing the ‘whats in it for me’ credo, to see why the property developers were offering, what seemed to me at the time, a very good deal. The cost of the apartment was $320,000 net return of 5% (they pay rates)($306 cash per wk). If I decided to sell in 5 years for say $500,000 the rent would still be based on the buying price of $320,000. It would be difficult to convince a new buyer that they were stuck with a leasor paying $306 per week (inflated annually)when 5% net of their buying price would be $481 for the next 5 years plus 2×5 yr options. This is the easiest way for me to understand that down the track when values go up, and here in Rockingham WA, they will still rise alot more than they currently are, I think I will be kicking myself for locking in such a small rental amount. As I am about to purchase my first IP the cost of the apartment was way more than I wanted to pay (prefer to buy two if I can for a little more). I only live two streets from where all of the developments and building is going on and got excited about owning something that sounded like a great deal. I truly believe that the CG on the apartments will be good, however they are expensive now. when I spoke to my bank manager he told me that they wouldn’t loan the money because of the difficulty for them if I defaulted on my loan, and he also said that he wasn’t saying they were a bad investment. He did say that in his experience they are usually above the market value when starting out and it can take 3-5 years before they are worth what you paid for them.
In the long term they would pay your interest, however I don’t want to have to wait 20 years before I could get the going rent for them, or possibly have hassles selling it and because I am using my home equity. I think I could put it to better use with other options.
you can view the apartments on http://www.proproperty.com.au they are run by Quest apartments. I’m still trying to convince myself that I am doing the right thing, and that this won’t be the one I will regret forever. I went to see the agent at proproperty, Mark, who is handling the sales and he said that the ‘loans café’ across the road from him has been able to find finance for people, so those looking for finance may want to contact them (they may be a franchise, but have the same contacts Oz wide)

I am hoping that someone will reply to me saying ‘you’ve made the right decision’. [confused2] I’m dying to get my first IP so that I can get some confidence and experience behind me. I’m looking into the Geraldton area at the moment, then again, that’s only since this morning so could change my mind again [blush2]

Thanks Kay,
Ive just checked out another forum and read your invaluable advice. My apartment is off the plan due for completion Oct95. 33 apartments piggy backing a beachfront resort complex. Reputable coy owning 60 odd such complexes around Oz and NZ and has defence contract for short term stay. 72sqm with own bathroom/laundry facilities.
prices $280-360,000, mine is $320,000 net rental $16000. hoping to finance 105%, have heaps of equity in current property.I live in Rockingham WA which is about to get 5 beachfront resort complexes (approved and building commenced), railway in next 2-5 years, navy base here and housing is still relatively cheap along approved rail track. would like greater returns but as this is my first IP the guaranteed rent is very tempting. Not too sure about the 11 sec sol as rental is net (only on chapter 6). Capital growth is good as area is still in starting stage, however there will be alot of apartments around in say 10 years when first review comes around. (There is a valuation at 5 years, I think its called hatchet?). My saving grace is that with mine being a street back from the beach it will be cheaper than the ones currently selling off the plans for $500,000 plus, with no guarantee.
I feel as if there must be a catch somewhere, need to get professional to look over the contracts. I wanted to stay with my bank as have a good relationship with loans manager, however they won’t touch this one.
Regards
Lisabellan