Serviced Appartments? Are they a good investment?

That sounds high for that type of product. Where are they?
Generally with these types of investment you will not get little or no capital growth. Because these properties are deemed commercial in many cases you will only get around 60-65% funding. If it sounds to good to be true it probably is.

Nigel Kibel

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May I ask whether it’s marketed to you by a property investment group or you happened to find it yourself? If it’s the former, then take all the more care in doing your due diligence.
I nearly bought into one and was fortunate to be able to pull out (though not without losses). But I received the most revealing bit of news last night when my finance broker told me that one of her clients locked in to one of these apartments only to realise that the bank valuation came in at $40K less than the purchase price. Furthermore, the fine print reveals that there is NO rental income for the first 3 mths! So now that person is struggling even to get finance to complete the deal.

Having said that, depending on your strategy/goals, serviced apartments may have a place in your portfolio.

With serviced apartments there is an added risk to the lender as they are not in such high demand. Some factors you should consider would be the size.

The property would need to have a living area exceeding 50m2 to get a lend in most cases with the lender looking at 40m2 – 50m2 on merit.

On 50m2 and over you would be looking at around 60-65% against the valuation of the property or contract price whichever is the lessor.

A lender on a serviced or managed apartment would no way do an 80% lend unless maybe under a private or second mortgage arrangement.

Andrew

These investments can be very good or very bad. I suggest you do a lot of research. My experience shows that because of reasons such as finance and apt size the banks are reluctant to lend a high LVR. Check the lease, exit options from the lease, return, how the yield is calculated (can be per night, pooled, fixed price/term etc.) Resales can be difficult but a good operator will manage and market the investment well.
Look at a credible operator such as Mirvac Hotels (Quay West, Sebel, Como Sea Temple brands) Can usually find a good priced resale if you wait. Bonus are things such as no letting or agents fees, well maintained, paid regularly.

Worth a look..

pw