I am currently looking at a dual keys in parramatta, which yields a good rental return, 7%. Just not sure if this would be a good chance, considering it is hard to assess the market value. I am new to the property investment. So could anyone give me some advice
Dual key units are generally located in Hotel/Motel style developments or in Student accommodation blocks and while they will show a better than average rate of return they usually suffer a lack of Cap growth due to the fact that when they come up for sale the new purchaser will also want to achieve the same rate of return (or better once they get older) so unless the rents increase at a good rate then the property value will remain low.
A lot of this type of building precludes (or discourages it) owner occupation as well.
Jon
Thanks for your advice, JON. What do u think of Parramatta? It seems that It would keep the strong rental return in the long run
Sorry, I can't comment on Parramatta. I'm in QLD. Have a think about the following example.
You purchase a 2 bedroom dual key unit for $300,000 which grosses 7% rent return or $404 per week. For the purpose of this exercise the annual growth for a two bedroom unit in this area is 8%. This would mean that the new value after 5 years would be $440,798. In order to maintain the 7% rent return you would need to be getting $593 a week. Unfortunately this does not often happen.
Saying all that, I have seen some good examples. You must be thorough in your analysis.
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