Hi Guys,
I have been on and off this forum for a while, and due to laziness, haven’t as yet purchased my first IP. My wife is due to give birth in 4 months, so I think its time I got my butt into gear while we still have her income (for the bank’s comfort, not mine).
Anyway, I was searching, sorting, etc. and I came across a serviced apartment for sale in the outer suburbs of Melbourne. It is in a Motel style setup, and states that it is securely leased by Quest on a 5 +5+5 yr lease, with 4% increases per annum.
Currently asking $130k+, with a rental return of $179 p/w. Another is under contract I believe, but was returning $12,938 p.a with the same asking price.
My questions are:
1. It specifies that the return is guaranteed, so does this usually mean you pay a premium for this guarantee (eefectively paying the rent in advance yourself)?;
2. It states no management fees, I take it this is because they take their cut before the money comes to you?
3. What are the pitfalls of purchasing this kind of investment?
Any other advice you could offer on the subject would be greatly appreciated.
Thanks in advance!
Ashley
Hi Ashb
You need to ask more questions and definetly don’t assume the income is net of expenses. Generally all of these come out of the rent you think you will be getting and suddenly it looks far less attractive. The capital growth will not be great and re-sale becomes difficult as newer apartments spring up nearby making your apartment less attractive to tenants. Better options are out there such as house and land pacakges in the right area giving you immediate equity on completion. I currently have 2 underway in WA which will come in at values approx $100,000 each ahead of costs to build.
Good luck – also with the baby!
Sparky
Hi Guys,
just a thought. The IP is in Victoria what you suggest in WA. I thought that would make a diffrence in capital growth (I still see vic as real good investment area)…and also more accessible physically in case of an emergency or reselling ect.
I am looking into motel investment apt and unilodge too in the city of brisbane. It is a good start.
Good luck with the baby!
di
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