All Topics / The Treasure Chest / Investing in Serviced Apartments

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  • Profile photo of BlueboyBlueboy
    Participant
    @blueboy
    Join Date: 2003
    Post Count: 3
    May 9, 2003 - 12:45 am

    Hi All,
    My wife and I have decided to invest in an inner city property in Melbourne as a means of growing equity. In the first instance we would negative gear with the intention of growing a portfolio (2-3 IPs) that would achieve a rental return to meet mortgage repayments (hopefully). The long term aim would be to own the portfolio and use the rental income to top up super income in retirement.
    For the first IP we have been looking at some serviced apartments in St Kilda Rd area that achieve guaranteed rental returns (7%, not the 11 second rule mind you). Initial leases are ten years with an option for a further ten. My concerns are:

      What happens if company managing lease goes under? Can I break lease arrangement or does administrator take over?

        How can I best determine if necessary capital growth (ie 7-10% pa) will be achieved in order to fulfill aim of growing portfolio?

          Is it worth seeking professional advice and management assistance with such an investment?

          Hope someone can provide some insight!!

          Cheers,
          Blueboy

          Profile photo of SpockySpocky
          Member
          @spocky
          Join Date: 2003
          Post Count: 10
          May 9, 2003 - 1:42 am

          I didnt know anyone would still want to purchase these given the high vacany rates in the CBD?
          Also the developers/marketers subsidise the rent until the guarantee period ends thenit drops off
          Be careful

          Profile photo of truebluetrueblue
          Member
          @trueblue
          Join Date: 2003
          Post Count: 142
          May 9, 2003 - 2:09 am

          Spock is right. Be very careful. Those rental guarantees are worth very little. Personally, I would not buy any property that I have no control over. Also remember that property appreciate because of the land content.

          Profile photo of BlueboyBlueboy
          Participant
          @blueboy
          Join Date: 2003
          Post Count: 3
          May 9, 2003 - 7:46 am

          Thanks all. I have been sufficiently scared off, back to the drawing board. So is the Melbourne CBD a lost cause at the moment?

          Profile photo of Stuart WemyssStuart Wemyss
          Member
          @stuart-wemyss
          Join Date: 2003
          Post Count: 598
          May 9, 2003 - 9:53 am

          Most (if not all) lenders are very wary of lending in Melb CBD… This is always an good indication that it might not be a good buy (however there are always exceptions to the rule).

          Cheers

          Stu

          Property & Finance News
          at http://www.prosolution.com.au

          Profile photo of LeighLeigh
          Member
          @leigh
          Join Date: 2003
          Post Count: 130
          May 10, 2003 - 10:56 am

          Hey Blueboy,

          With property investing a big thing to keep in mind is LAND APPRECIATES, BUILDINGS DEPRECIATE. The higher % of land content the property has the greater the effect of capital growth. Of course another major factor is POSITION, but the main reason a lot of investors get burnt from investing in apartments is because of the very low land content. What they have bought in reality is an asset which is 95% subject to depreciation. Have a read of the book Seven Steps to Wealth (can’t remember the author of the top of my head, Fitzgerald I think?) it’s a really good starter.

          Cheers Leigh.

          “All the world’s a stage, and you choose the role you want to play on that stage” William Shakespear

          Profile photo of TerrywTerryw
          Participant
          @terryw
          Join Date: 2001
          Post Count: 16,213
          May 12, 2003 - 3:14 am

          Glad to see you have pulled out!

          You also have to think about resale value too. these things are hard to sell.

          Terryw
          [email protected]

          Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
          http://www.Structuring.com.au
          Email Me

          Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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