Does any one have experience with investing in commercial property specifically a hotel unit??
The agents says the hotel group guarentees weekly rental income returning around 8.5% pa… and adjusted yearly by CPI…
Maintenance, repairs, rates etc are covered…
Are there any costs that i will need to cover ??insurance home/content?? Management fees??Is there anything else that should be considered…
Im very new to property and know even less about commercial property so any help would be appreciated…
Thanks
Kelvin
Hi kelvinh, I will assume your talking about service apartments. As with everything there are some good ones and bad ones. SA’s are generally not as easy to resell as houses and units. My bank manager advised me that it is difficult to establish the equity, thus difficult to borrow against. If it is + cash flow then that will count towards serviceabilty of future borrowings. I dont know if this was his opinion only or a general concept amongst lenders. If you plan on keeping long term and it’s + cash flow then it should be okay. Are there any bank guarantees in place about rental returns or rachet clauses and how long is the service lease for? Some of these even offer to let you stay for free for a limited time each year as an inducement to investors. There can be management costs or the developer may offer secretarial services for a fee generally less than body corporates, but this is case by case.
C2
“Is it true the more you owe the more you grow until the bank steps in?”
C2
Thanks for your reply… yes talking about serviced apartment…
I is +ve, and from a quick calculation will be till interest rates to about 8.0% which gives me a good buffer…
My plan is to keep it long term?? but also want to be able to borrow against it to buy more +ve props, in the future… Thanks for the advice… will definetely have find out more about the rent return guarentee… and ease of resale…I personally would never touch anything like this. 8.5% is a fairly low yield for the high risk. It is hard to get finance and hard to resell. Often the management fees in these sorts of place are also high. It is still possible to find houses returning much more than this, with much better prospects.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
G’day Kelvinh…
I totally agree with what Terry has said in his reply. Worth adding that this fad hit Canberra a number of years ago.
Your biggest problem will be in trying to resell one day. You will be competing with the Agents that will be managing other “rooms” in the complex. Cause that’s all they are…just rooms.
I am yet to come across anyone that is pleased that they purchased an investment such as this.
( if that’s what u want to call it)Why complicate things? What is the attraction?
Bet the banks don’t like them. If they do lend I reckon they would want you to put up additional security.Better deals to be had, they might sound old fashioned, but ahouse is your best bet.
Guaranteed Rents??? This is factored into the purchase price…so it is overpriced at the outset. You want a guarantee? You pay for it !
Cheers…
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]Hello Kelvinh
I agree with many of the posts to this thread. Please take a close look at the management contract, as you may find that you will need to pay for refurbishing every so many years.
Also, I have seen some contracts which stipulate that if the unit is sold, the new owners will need to take on the services of the existing managers. This limits the amount of buyers you can on sell the property to should the need to arise.
Holding and buying is the key, but its also important to factor in changes, hence the need to offload property quickly if need be.
David Femia
C2, Terryw, Billfromoz, david femia Thanks for the advice…
I was attracted to the investment because of its low cost 98k.. and the 5yr guarenteed rent ($155wk)so I could easily pay off a P&I loan with the rental income with out any outlay or worries about vacancy, rates, rapairs or maintenance…Thanks again everyone… This would have been my first IP… Im very glad that I got some advice from some more experienced Investors…
Oh well I will continue the search for some residential +ve country props in WA…
Search continues…
Kind regards
Kelvin
[email protected]
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