I am looking at a Service Apartment – St Kilda Melbourne, which provide guaranteed 6% returns. Any comment? Is it a good investment?
Thanks.
Be very careful.
6% is not a good return for a start (to me). You can get nearly that in an I.N.G account with no risk.
Hard to get finance if the apartment is not over 50 sq/m.
High manangement/holding costs.Read Margaret Lomas’ books and see sections on Serviced Apartments.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hi Marc,
Thanks for your advice. Will you be able to share some lights on the do and don’t about service apartment?I quite interested with the service apartment, because of the +ve cashflow after putting in 35% downpayment. The rental return is able to cover the loan payment after substracting some expenses.
Most of the on-going expense is already covered by the operator (i.e. body corp fee, mgt fee and insurance). The agent/developer is also willing to throw in the stamp duty, legal fee and Title deed registration fee.
Thanks.
Originally posted by L.A Aussie:Be very careful.
6% is not a good return for a start (to me). You can get nearly that in an I.N.G account with no risk.
Hard to get finance if the apartment is not over 50 sq/m.
High manangement/holding costs.Read Margaret Lomas’ books and see sections on Serviced Apartments.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Positive after you put down 35% ??????????????
What about the return on that 35%?
Purchase if you like but you would find better deals by spending 3 minutes on the telephone.All the best!
[cigar]
Hi eforce,
I agree with HookamC. You can make a lot of deals cashflow + by putting in 35% deposit.
You also need to consider the capital growth prospects. Serviced apartments usually have long leases and the capital growth is usually limited. There is not a lot you can do to increase value of the property for both rent and capital growth.
The agent/developer is throwing in the stamp duty, legal fee and Title deed registration fee because its already factored into the price. I doubt they are doing it out of the goodness of their heart.
You are better of investing your money in some safe investments that will give you around 8-10% return.
Sanjiv
*******“There is no passion to be found playing small – in settling for a life that is less than the one you are capable of living.†– Nelson Mandela
I bought a serviced apartment within walking distance to the cbd about 18 months ago. It was an existing building to be converted to apartments then managed by an operator with 6.5% return. Anyway the short story is it was bought for $245,000 on which I put dowm $30,500 borrowed from bank, now valued at about $280,000. I still am waiting for them to be finished should be this month, I hope, so I have made an on paper profit of $35,000 for very little outlay on my part so far.
I think they can be an ok investment as long as the location is right and plenty of due dilligence is done
I would say look at them carefully but they are not all bad investments.
Cheers DaveThanks for all the comments and suggestions.
Other opportunities that i am also looking at residential houses at Flinder Street, Cook Point and Truganina.
Another question I will like to know if it is a good time to invest in Melbourne?
Thanks.
Originally posted by sanjivgupta:Hi eforce,
I agree with HookamC. You can make a lot of deals cashflow + by putting in 35% deposit.
You also need to consider the capital growth prospects. Serviced apartments usually have long leases and the capital growth is usually limited. There is not a lot you can do to increase value of the property for both rent and capital growth.
The agent/developer is throwing in the stamp duty, legal fee and Title deed registration fee because its already factored into the price. I doubt they are doing it out of the goodness of their heart.
You are better of investing your money in some safe investments that will give you around 8-10% return.
Sanjiv
*******“There is no passion to be found playing small – in settling for a life that is less than the one you are capable of living.†– Nelson Mandela
Hi eforce,
Overall Melbourne market is on the up again but some suburbs seem to be outperforming others.
You mentioned houses at Flinder Street, Cook Point and Truganina.
Houses in Point Cook should be good for LONG TERM holding. At the moment there is lot of supply of house and land in and around Melbourne’s western suburbs and therefore the prices have not increased a lot. Point Cook is only about 25 minutes drive to CBD.
I do not know a lot about Truganina but the comment above should apply to it as well. I am not too sure of the rental demand in these areas.
The apartment in Flinders St should be okay but make sure its not small because the lenders do not like small apartments too much. Ideally have a 2BR apartment atleast. Is this a serviced apartment as well? Is it off the plan? The rental demand in city has picked up a lot and therefore the returns are better of late.
Why don’t you consider buying in and around Frankston or the suburbs around Eastlink. I think they will experience further capital growth. In fact there are many opportunities in Fraknston where you can subdivide the property.
Lastly, but more importantly, you need to decide your property investing GOALS and investment STRATEGY. You can then decide whether a serviced apartment or a suburban house is the best way to go.
Regards
Sanjiv“There is no passion to be found playing small – in settling for a life that is less than the one you are capable of living.†– Nelson Mandela
Perhaps I should share more of my investment objectives.
Basically I am 30, married without kid. Below are a few of my investment objectives
1) Diverstify from my stock investment (hope to cash out some profit and redirect them to another asset class)
2) Learn about Property investment (this is our first investment on real estate)
3) Slowly building our retirement nest egg. (hoping to build our multiple income source, providing us with some passive income)Thanks.
Hmm if I were you I would study demegraphics and the effect that it has on the economy. Maybe then you might not want to sell your stocks for an inner city apartment just yet.
All the best!
[cigar]
Another thing to add is that I am a not an Australian. I am a foreign investor, whom have visited Melbourne several times (as a tourist) and now very interested in investing into it.
I am not trying to speculate my local stock market, but I just hope to diverstify.
Basically take some profit and reinvest it somewhere.After going thr a few developments, below are the reasons why the Service Apartment at St Kilda still attracts me.
1) I know that it is not very wise as this service apartment does not allow me to leverage (to the max) and use OPM (other people’s money). However, after looking thr quite a few new developments this one can provide me with quite a good positive cash flow (note: for oversea investor, we are not allowed to look at re-sales market)
Generally, most of other development will require me to top up around 300 – 500 monthly if I take up 90% loan.2) Being new to real estate investor, I thought getting a service apartment and allow a professional to manage the property is a good choice. Moreoever, they are able to give me guaranteed at least 6% net yield for the first 2 years and 6 + CPI for the next 3 years. That make it less risky, and allow me to do my sum easily
Quite a quiet thread.
Any other comments.Sorry if I am too defensive, just will like to share with you all how I decide on my investment.
Thanks, any comment is welcome.
hi eforce,
You should have a look at the following website because you are a foregn investor:
http://www.firb.gov.au/content/faq.asp
Regards
Sanjiv
*******“There is no passion to be found playing small – in settling for a life that is less than the one you are capable of living.†– Nelson Mandela
Hi eforce
if you havent read Steve’s new book 0-260+ properties in 7 years then i suggest you do. it will help to provide you with some finetuning of strategy, if nothing else.
i hope this helps a littleTroy
TroynBec
You can have more than you’ve got because you can become more than you are
Hi Troy,
Sorry I have not read those books written by Steven, but I will love to.
Are you refering to the MasterClass Pack or book?
Instead, I have read books by Robert T. Kiyosaki (rich dad poor dad series) and Dolf De Roos (Real estate riches : how to become rich using your banker’s money )
Time for me to get educated.
Thanks
Originally posted by troynbec:Hi eforce
if you havent read Steve’s new book 0-260+ properties in 7 years then i suggest you do. it will help to provide you with some finetuning of strategy, if nothing else.
i hope this helps a littleTroy
TroynBec
You can have more than you’ve got because you can become more than you are
Basically take some profit and reinvest it somewhere.
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