Hi,
Hoping I could get some advice.
I put 10% deposit down (agreed to purchase) an apartment in a luxurious high-rise building on the Gold Coast, about 4 years ago. Completion and settlement is due to happen later this year.
The original plan, way back, was to sell the apartment before settlement. However I have noticed there are a number of the apartments currently for sale, giving me the indication that it will be extremely hard to sell it before settlement.
Recently we were notified that a well known Hotel/Serviced Apartments company were "moving in" to manage Holiday letting in the complex.
I have read a few threads on here, and it seems I should be very careful as Serviced Apartments do not seem to have a very good reputation.
It seems I have a few options, would like to know what people think and maybe what they would do?
1. Swallow the 10% deposit, get out and learn a very expensive lesson.
2. Attempt to get a mortgage, avoid the management company and try to find a permanent tenant until it was possible to sell.
3. Attempt to get a mortgage, join the management pool, purchase the furniture etc… and hope for the best until it was possible to sell.
With both options 2 & 3, I would not be wanting to keep hold of the apartment longer than 2-3 years.
Any help or advice would be much appreciated.
There is always a temptation to buy (what seems) hot property while visiting a holiday destination. Prices of apartments in new Gold Coast high rise developments drop appreciably at around settlement date, when a lot of apartments come up for sale (or resale). I would be loathe to burn the 10% deposit but you would need to hold the apartment for a lot longer than 3 years to see any reasonable capital growth.
I would suggest buying the apartment and looking for a permanent tenant. But do your sums to see what rental return you could get, as the demand for rental apartments in the building at settlement is likely to be low as well.The main thing is to know what it is worth compared to what you have agreed to pay.
If it has dropped then you could lose much more than 10% if you don't complete.
Would you qualify for the loan now? Some of these serviced apartments have great yields, so it may not be too bad.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I agree with Terry. If the value of the apartment has dropped you could be up for a lot more than just the 10%.
I think you should go and see a solicitor and see if there is a way out of the contract. Did you know at the time you signed the contract that several apartments could be used for "holiday letting"? Would you have bought the apartment if you knew? There are lots and lots of questions and a decent solicitor may be able to get you out of the contract if it has been breached, or there has been a lack of disclosure or misleading information.
Cheers
K
Regarding the above suggestion re:considering getting out of the contract (I wont comment whether this is a good idea or not as I am not familiar with your product or GC market conditions).
However I believe that most of the plan products have to be delivered within 3.5 years. There will be a sunset clause (I think) in your purchase documentation that will tell you what timeframe this is. If the developer has taken 4 years to deliver on a product with a sunset of 3.5 you should be able to terminate the contract. Would be worth checking!
Thank you for the responses so far….
I have pre-approval for the loan, pending a valuation. But in the application nothing was mentioned about Serviced Apartments because it was not an issue at the time of applying. Whether that's going to be a problem now…. I am not sure.
I have fired off an email to my Solicitor about this, when I first heard, it certainly crossed my mind that this would be a breach. But I thought as the developer is so big, that surely they wouldn't make a mistake like that if it was a breach….
Will see what the Solicitor says anyway….
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