Serviced Apartments – My thoughts

When you sell anything you want to make your product available to everyone in the Market.

Serviced apartments usually have long term leases attached to them, sometimes up to 25 years. This gives peace of mind for your rental income and usually makes them fairly affordable to own. But – (there is always a but) if you have a long term lease can you sell to an owner occupier? (the answer would be no) So the only person you can sell to is another investor. Investors only make up around 30% of property owners. You have just reduced your market by 70%.

More bad news – If you have ever tried to get finance to buy a serviced apartment you will find that most banks don’t like them and like you to put enormous amounts of other equity so they will do the deal (NAB and a couple of others are a little different here) So your 30% market has probably been reduced by half again. We now have a market of around 15%.

So in a nut shell the capital growth on a serviced apartment most probably will not be the same as a standard apartment.

On the bright side though – if you have a lot of equity and you can’t sleep at night worrying about rent and you really want an IP then serviced apartment may be your cup of tea.

I reckon that there is better stuff out there though.

Petters

Maybe if you are really keen to get started now and not save the deposit which on a $300,000 property assuming you borrow 90% will be about $50,000 when you include costs you could borrow some equity off someone.

Parents are usually good with this and you have to make sure they are aware about how it works.

In a nut shell though if they have the equity and you have the income you can form a little partnership with them.

What you are doing, if you invest is actually called rational renting. As you stated it is cheaper to rent the house you want thena buy it. If you blow the money you are saving then you are making the rent money dead money. If you invest the money atht you are saving ten you are rational renting.

Petters

Toe Edge,

As far as I am aware, assuming that you are saying that your two IP’s are cross colateralised, when you sell one the bank will require you to leave enough cash in a term deposit that they will then hold security over. When you buy another IP they will lokk at the equity in both again and if you have enough equity in the the existing IP then they will cross colateralise these two again.

If you don’t have enough equity, then if you want another one you will have to use cash.

This is the way I would do it – If you desparately want to sell then sell. Before you sell make sure you are aware of your Capital Gains implications. When you sell pay down your home loan. See your bank and look at getting a Line of Credit against your home and then use the funds in here to give too the bank as the security need on the other IP. This LOC can then be used to assist other purchases and as long as you only use it for investment purposes it will remain tax efective. And you home is not directly collateralised against your IPs.

Your situation seems as though it can be structured to achive what you want.

One last comment – if the IP you are thinking of selling has appreciated well then, maybe it will continue to – I’m personally happy to have debt against my home and keep my properties for as long as possible.

Petters

Geez, his books for $30.00 each sounds like a good deal to me! I think I would be more motivated having the $7K to spend on a holiday to the Seyschelles.

No Sooshie, anything that burns innocent citizens through no real fault of their own gets regulated. Lets get that straight. Maybe the money that is being made is at the expense of the ordinary “Joe”

Andrew if you could get the same or better returns in another state and not have to pay as much stamp duty wouldn’t that be even better?

Chris

Silkwood, i do. I buy in NSW and QLD. Yet i live in Melbourne. I refuse to pay the amount Bracks is asking and if it means buying interstate i do.

Chris