HI, i am looking at a Quest Apartment for investment purpose – the first time i look into this type of property. The lease will expire in 10 years I was told by the real estate agent that at the end of the lease, it can be owner-occupied or privately rented. Is this generally true for Serviced apartments, especially Quest? I have asked the Council regarding the zoning restriction and they said it is probably fine. I don't know if there are any Body Corporate limits, e.g. will they allow 1 apartment to be owner-occupied or privatly rented, and rest to be serviced apartment?
I have read a few postings on Serviced apartments (after joining the site today) and released that this type of property maybe slower in capital growth for reasons of being limited to investors only. Although I have the following questions:
– Is it true that the buy price of this type of apartment is also lower than similar (non-serviced) apartments for the same reason?
– Is it true that at the end of the lease agreement, if the Owner decides NOT to renew the lease with the Serviced Apartments operator, the value of the property will experience a spur growth and be in line with similar properties (non serviced) in the area, as it is effectively a normal apartment (as it can be owner occupied)?
many thanks
Hi Din
Assuming you get nett income left over after you pay all Quest’s fees like booking fees, commissions, advertising fees, cleaning fees, repairs & maintenance, Body Corporate levies & fees, then you need to know how much those fees will be, and how much return you get in $s and ROI %. Not sure if you’re paid on nett income of your one apartment or if nett income from 50 units is pooled and you get 1/50 th.
Body Corporate / Owners Corporation may have lots of owners or be dominated by Quest due to numbers, so if buying from Quest on certain assumptions, better to make them contractual if possible, (see your solicitor) so you can live in it or rent out or whatever after the lease expires. Find out how you can keep Body Corporate post-lease options open during the 10 years lease.
Off or On Lease shouldn’t change it’s buy or sell price. Depends on the local market and what the potential buyer wants to use it for, and its nett rental return for investors.
Cheers
thecrestThese are my opinions, suggestions and assumptions only. You should do your own due diligence, get expert advice where appropriate and make your own decisions.
thecrest | Tony Neale - Statewide Motel Brokers
http://www.statewidemotelbrokers.com.au
Email Me | Phone Meselling motels in NSW
To thecrest,
many thanks for your reply. The lease agreement to Quest gurantees a fixed annual rental income (subject to CPI adjustment) regardless of there are guests or not in the apartment. The expenses owner has to pay include Body Corp, Council rates and Water. There are no other fees associated with attracting hotel guests.
so you think that Off or On Lease shouldn't change it's buy or sell price, just limits the buyer's market?
I was looking at Quest apartments with great excitement about 4 years go. This was before I started educating myself properly on property investing. Amusingly the same apartments are now on the market for EVEN LESS than what they were selling for 4 years ago. Hmmm.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
MAke sure the banks will lend you money against these. They don’t see it as a normal property investment.
Also – they are hard to sell if ever you have to – in general these do not make good investments As JacM says – minimal capital growth
Serviced apartments are more of a commercial property investment and so the capital growth is tied to rental yield- as such the value will likely only rise in line with rental increases, which in turn will be in line with CPI. There is also nothing you can do to increase the value of your investment outside of these gains which is an opportunity you will have with other commercial investment properties.
The problem with these are that you are at the mercy of the managing agent- if the management structure opf Quest changes and the service they provide goes down, the value of your investment will fall as will the return as they will be forced to cut yields.
I think you are better off looking at other commercial property if you are chasing high yields, but that is just my opinion.
Cheers,
Lukethank you guys for the information!
To JacM: I am quite interested in your change of ideas from 4 years ago. i am probably in the same 'Excitement' period. what u've leaned that has changed your mind about investing in Serviced Apartment. care to share?
To Luke86: i think i'm starting to understand the Serviced Apartments should be treated as Commerical investment now. so even if this particular one comes out of the lease,assume it can be owner occupied, However as the building will still mostly be serviced apartments, then the apartment is still limited by the commerical nature of the whole building? i.e. Caplital growth is limited compared to a normal apartment in a normal building in the same area?
To Charles 1: thanks mate. i've sorted out the loan part already. do u think a serviced apartment is harder to sell even after it comes out of the lease?
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