Hi All,
I am looking at some studio apartments in and around Melbourne CBD. There are quite a few available in a 150-170K range with weekly rental returns in high 200's low 300's. On the surface these returns appear very attractive, but being a property newbie, I wonder if I am overlooking something.
Does anyone have any experience with these types of properties? Are they worth looking at/waste of time? What are the things to look out for?
Any help will be greatly appreciated.
Cheers,
Ilya
Sounds like a great return on the face of it.
Do all your figures- you will need to take into account body corporate- if its City Central then I might assume it is high rise so there will be body corporate and other costs associated.
I had similar type investment for sale close to university but could not sell as the figures when all was taken into account was not such a great investment.
Is it studio apartment? How many bedrooms? Car parking? Who will be your target tenant? Can they afford this rental?
Call some agents as a prospective tenant and see what you get for that sort of rental as well. See how it compares and what you get for your money.
Is it established? Or off the plan? Have others been sold in this complex?
Just a few questions to consider.
Hi Ilya,
Welcome to the forum. Studios are one of the worst possible investment options.strategies. Look at the strata associated with the property. I dare say that the yield doesn't look as interesting as you thought. Secondly, you are taking a gamble with the times of investors, more frequent tenants instead of established tenants. Thirdly, ask yourself how you can add value for look at capital growth on the property.
I would strongly suggest you talk to more investors, crunch the numbers (outgoings vs income) and also speak to local RL agents. I think you should look at 2 bedroom unit at a minimum even if it means looking outside the Melbourne CBD.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Yes with studios you need to know the floor Square metre size is as some banks have strict lending criteria on this , ie they might lend only 70% or less which means a big capital injection from you…
Not a fan of apartments in the Melbourne CBD or nearby Docklands. Seems to be over saturated with supply, and more and more going up all the time. Prefer something further out in suburbia, but that's just me.
Cheers
Tom
I have never invested in studio apartments. In my opinion it is not worth it. I usually target families, so I invest in 2-3 bedrooms houses or apartments.
Totally agree, I wouldn’t bother going further. With so many available the capital growth will be slow and minimal
Hi Iljay,
Studio apartments are often sold on the attraction of perceived high rent returns. You need to understand that a serviced apartment often has significant ongoing costs and these can seriously erode your net cash flow – there is a huge difference between gross and nett cash flow.
Banks see studio apartments as a higher risk and therefore their willingness to lend at reasonable LVRs is often restricted. For this reason a studio apartment becomes more difficult to finance which, in turn, reduces the number of potential buyers and thus the long term growth prospects of these types of properties.
By your a own admission 'there are quite a few available' – ever wondered why?
If the rent returns are that great why are so many available? They simply don't make great investments.
Cheap & high rent return doesn't necessarily make a good investment.
As has been mentioned depending on the actual size of the property you might be lucky to get 80% lvr
You have to bear in mind one day you might wish to sell it and your potential buyer may not have 20% of your asking price.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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