Price : $80,000.-
Annual Return: $14,000.-/pa.
Occupancy : 98%
Modern highrise building (not new), pool, gym, sauna.
Fully furnished, self contained studio, CBD location.11 ss rule : $14,000.-/52/2×1000= $134,615.-
Price is well below that!Is this good? Pros and Contras please. Thanks!
Hi Kelvin,
I intend to ask the RE agent about that tomorrow.
Thanks.G’day Benny…
$14,000 gross return on $80,000 pp = 17.5% Gross.
Based on the figures you have been given please make sure of the following:
1)Evidence of the $14,000pa
2)The title ?.. as it sounds like you could be buying into nothing more than a “hotel room”.
3) Can you arrange your own Prop. Mgr. If not be extra careful…ask Alf in Adelaide his experience
4) With a 17.5% gross return it sounds like you could be buying a business rather than Real Estate and if so, then $80k is far too much..you would want a return of at least 30%.
Benny…it sounds to me that it is either the equivelant of a hotel room or really a business…if so…it is not Real Estate that you are looking at…just made to sound/look like it is.
If you are ever offered a return like 17%…it will NOT have any Capital Gain… Be careful
Cheers
Bill
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]The title of this subject is ‘Student apartments+ Cashflow’ so Prop16 is talking about a building specifically or mainly occupied by students and he isn’t talking about a block of units operated as a hotel by someone who holds a headlease.
If it was operated as a hotel then I personally wouldn’t have a bar of it as it may be hard to resell at a later date.
If it however was near a university and it was occupied mainly by students it may be a proposition.
A friend of mine owns a block of 18 bedsitters near the University of NSW and the building has a very good occupancy rate.
Yes, he may sometimes (as he has at present for that matter) have say three vacancies but they fill up very quickly.
The one thing which sows doubt in my mind is that the rent (for a bedsitter mind you !!) appears very high.
Better make sure that that is indeed the going rate and not merely a ruse to suck you in.
A drawback ias that finance may prove hard to come by for a bedsitter.
If the living area is less than 25 sq. metres
it will be just too hard. As it is there are very few lenders who would be prepared to lend on even a 25 sq. metre bedsitter. In any event the location may put lenders of as well. I suggest you better check all this out before you put your signature on the contract.Cheers,
Pisces133
G’day Peter and Benny…
Another issue is that the lease back is with
another company…probably with a $2 paid up capital.One of the major baks are uncomfortable and giving Benny the run around, which means they will pull the pin on the deal.
Personally I would walk away and wait for a buyers market… the price is also inflated to guarantee rents …i dont like it…why not just a personal guarantee…they are hiding behind a company without assets to provide a guarantee….and probably not worth the paper it’s written on…
Benny, Please consider my suggestion offered to you last night… an investment of $200,000-$500,000 with a fully secured first mortgage at 15% pa guaranteed. This is vauable to you going into retirement. When appropriate after the Real Estate fall out maybe joint venture deals at bargain prices…in the meantime 15% in your pocket.
Lets meet..
Bill
Cheers
Bill
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]It’s 7.55AM in the morning, just a quick look in here. But thanks for all the valueable feedback Gents. I’ll think about that all.
Bill, I’ll contact you tonight.
Have a good day all!I don’t want to enter into an argument with anyone but this is how I see it :
>>an investment of $200,000-$500,000 with a fully secured first mortgage at 15% pa guaranteed.<<
Fully secured eh ? No pitfalls ?? No risks ??
Impossible.
Anyone who borrows money and who is prepared to pay 15 % has got problems and those problems can be passed on to the lender.
The least that is likely to happen is that the loan isn’t repaid on time (and, as well, most likely, the interest on these loans isn’t paid as and when it falls due as well).
I was in someone’s house yesterday and that person happens to run a business lending money (via second or third mortgages) to people in trouble and he only lends up to the 70% to 75% LVR mark and he enjoys some protection as he requires a sworn valuation from a valuer appointed by him.
That particular person has about $ 2.5 m in outstanding loans. He showed me a report of these loans and all bar one were in default by having exceeded the agreed loan time period as well as the borrowers’ interest payments being in arrears.
Now that lender has lessened his risk by having his money spread out over several borrowers and he isn’t at all unhappy about all those loans being in default as penalty interest cuts in.
That particular lender is however in a different situation compared to many of the people on this site in that, even if [unlikely at it may be (though quite possible)], all of this money were to be lost, he can survive because of his strong financial position owning other assets.
Now if one is parking one’s money in a bank or a cash management trust until one finds a good buy to spend one’s money on that is one thing.
However, based on my friend’s experience, lending in high risk situations appears to imply that one cannot count on one’s money being available when needed.
Pisces133
Hi,
Well, my 2cents worth is that positive cashflow is positive cashflow.
So long that:
1. This investment fits into your wealth creation plan
2. You have done a thorough due diligence (there are some excellent points made to help you)
3. You are aware of the risks and rewards
Then IMHO, $80,000 doesn’t seem like a lot to get into the property market to me, and you should be earning cashflow (based on what you have written here).
The point about finance has legs… be sure to add a ‘subject to finance’ clause when signing the contract.
Sincerely,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
G’day Peter…
As I suggested the bank won’t lend for the reason I suspected in the first place.You won’t get into any argument with me or Prop16 even though they have proven, not be what the title of the post suggested. I don’t think you would pay $80k for a hotel room just because it is cf+ for the reasons you said.
The 15% is by way of Bank rate plus % of income the investment generates. Historically(20+ years)the returns are staggering, and the suggested return is about a 25% of traditional returns. Nothing to do with what you have suggested like 2nd 3rd mortgages with someone without the capacity to service or secure.
You don’t all have the facts Peter, I do and that’s why there’s no argument from me.
Cheers
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]Thanks again for your responds Gents!
But please, there’s no need to argue about the above topic. Let’s be professional and respect each other opinion.The building is located in the centre of the city, about 500 meters from the University complex and is only occupied by students (mainly from overseas). So location wise it’s excellent.
There’s a choice of 7 Apartments, ranging from $80,000 – $140,000, returning up to $14,000Allthough it looks very good my concerns are as follows:
– The apartments have been advertised for a few
weeks. Why hasn’t anybody bought it?
– As you said Bill, I might be buying a hotel
room rather then an apartment. It might be
operated as a hotel, I still have to find that
out
– A friend told me that the rooms are very small,
so it could be that it’s less then 25 m2. And
as you mentioned Peter, I wonder if I could get
finance from the Bank
– Capital gain and the possibilty to resell it in
the futureSteve, I would appreciate if you could go a little more into detail about the 3 points you mentioned, especially point 2.
I’m still in a learning process at the moment you see.Thanks everybody!
Prop16, your story is very much different now compared with the details shown in the original post.
Originally you were talking about a purchase price of $ 80 k and a return of $ 14 K p.a.
It now appears as if the prices range from $ 80 K to $ 140 K and obviously the return of $ 14K p.a. would apply to the dearer units rather than the
$ 80 K units.Even at this stage you don’t as yet appear to have any idea about the size of the unit so we all are really very much talking in the dark. What a waste of time and energy. It would have taken only a phonecall to find out a bit more about the details which are so very much relevant in making some sort of assessment as to whether it is worthwhile pursuing.
As far as the fact that the apartments have been advertised for a few weeks is concerned, it doesn’t necessarily automatically follow that the proposition isn’t any good.
It could actually work very much in your favour as the vendor may be under pressure to make some sales and that fact alone may well soften the vendor up a bit so that one can negotiate a better purchase price.
From what I assume is probably a return of around
$ 8,000 p.a. (gross) on a $ 80K investment appears to be O.K. under the circumstances.In fact there appears to be a real good opportunity here to resell the units to the tenants (or even to combine two bedsitters into one larger unit !!!!
O.K., where did you say the location is ?
(I am actually quite serious there and would love to have a look at them).All other aspects (for example finance) are very much things one would need to look into before one makes a commitment.
Cheers,
Pisces133
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