I have just come across a very interesting cash positive property.
It is a 1 bedroom unit which is part of a large complex (over 70 units) which is rented out to retirees.
Rent is paid to the owner via the government as 80 – 85% of the tenants government pension is withheld for their rental payments + the rental assitance allowance they also receive.
I was advised by the RE Agent that rents are increased 6 monthly according to CPI.This is the first time I have come across this scenario from an investor perspective. It all seems to be too good to be true! Has anyone ever investigated this scenario? Any advice would be greatly appreciated.
There was also another on the market which sold recently, and RE Agent advised that it was on the market for 5 months. Now that has made my weary as it seems they are hard to get rid of – but is it also the current flat state of the market distorting this a little?
Thanks in advance
Mel
Mel,
Biggest problem is getting a loan for retirement properties. A line of credit will be ok but if you need to use the retirement unit as security for the mortgage the mortgage insurer may be concerned that your market for resale is limited to retired people.I have no experience in purchasing this type of investment but know this could be a problem from doing a mortgage broker course.
It would be a good idea to check your finance options before committing to purchasing it.Mel, make sure you get to see actual income / expense statements from the current owner. I looked at a few retirement properties in SE QLD and by the time all the management fees, rates, body corporates etc. where included (don't forget your tenants usually get 3 meals a day included in the rent) the cashflow was only just positive and simply too low in my view if you consider most of these places will have limited capital growth at best.
Most of these retiree investments (and there are plenty out there) fit the conditions/scenario you described.
They are geared toward very low risk investors who want certainty as far as tenants go but thats about there only pro.
Id put them in a similar basket as most Defence Housing and Student accomodation, where their is little capital growth becuase all the usual drivers and fundimentals for capital growth are non existant
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