Hi,
Just wondering if anyone has invested in student or holiday accomodation. We have been looking around for a CF+ and these type of buildings seem to be CF+. Obviously the vacancy rate on a holiday unit is a big concern but just wondering what else to keep an eye on. Also if anyone else has this type of property and how they find this type of investment stacked up against other types available.
Cheers
SoniaHi Soniae,
from what i have seen as a builder and developer in SEQ Qld, these types of accomodation style places (aged care, student, holiday) can offer improved rental returns. On the other hand their chances of Capital growth is not usually as high as other properties as their value is generally linked to their rental return. Obviously if rent goes up value goes up but valuers take a cautious approach.
Also, something else to take into consideration, a lot of these style of properties are sold with a furniture package. From what i have experienced, a lot of the banks won't finance the furniture.
Brett
There are a number of issues that you should familiarise yourself with before jumping into one of these investments:
How is the income distributed? ie is it pooled and distributed to all owners equally or each fends for themselves?
Returns are highly volatile depending upon the quality of the management
How easy will it be to assign the ownership (new management agreement etc)
What % fee will the manager be taking? Is there any adustment to this rate?
What other charges apply eg cleaning, linen, broadband, power, water rates, pool, grounds maintenance? How are these adjusted (linen/cleaning/set management/administration fee)?
What are your rights with regards to private use and private bookings (holiday accom)?
How much use do you get (holiday use)?
When are you required to refurbish?
Are all units required to refurbish at the same time?
Are all units of the same standard (ie exec/standard/budget)?
How is accommodation assigned? ie do the bookings get assigned to each room in order or does the manager play 'favourites' leading to more use (and better returns/higher maintenance) on some units?Holiday accommodation rate is too much because the owners will try to make the most out of the vacation and hence more will be charged.
sathyan wrote:Holiday accommodation rate is too much because the owners will try to make the most out of the vacation and hence more will be charged.There are higher vacancy periods and greater maintenance costs which are also reflected in the cost of holiday accommodation.
Student accom – limited capital growth as rental returns are limited to student income.
Holiday accom – very dependent on a strong economy – hmmm ???? not a good idea at present.
A weak economy will increase vacancies, lower room rates per night and squeeze profit margins of hotel / holiday acomm providers. A broke hotel or operator is a nightmare situation for owners.
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