Hi,
I am new hear but thought I’d start off asking a question on Serviced Apartments.
People’s comments seem to say that it is good for positive cash flow but not so good for capital growth.
So my question is – once the lease expires could you not convert the apartment to a “residential suite” and hence get the sale price at the residential market rate of apartments in the area? The area I’m looking has mostly apartments, and similar residential apartments sell for much higher.
Thanks in advance for your comments.
Pros:
1. Good cashflow and net yields
Cons:
1. Low LVRs
2. Limited CG
3. Finance is hard to get depending on a number of things such as whether or not the lender has already financed up to 25% of the units in the complex, whether or not it can be O/O, etc.
4. Resale is hard for the reasons above and your market is very limited
5. Valuation – I had one customer you had a fire sale in the complex and it caused the value of his unit to be significantly lower that what it was "supposed' to be worth.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
To answer your question – it purely depends on the lease. Some are 5 year leases and some are 99 year leases and everything in between.
Be wary from a finance perspective that the property needs to be O/O for most banks (only 2 make exceptions).
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Hi Shahin, Thanks very much for that advice. It does make the opportunity seem less attractive.
I was also recently informed that the banks were only offering 60% LVR due to the general nature of the longer term leases on serviced apartments. Which is not suitable for me.
Shame really, as i thought a longer lease would mean guaranteed income, hence lower risk.
Cheers,
Rob.
You can go to 70% but its has to be an A+ Application.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
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