student Apartments

Hi and welcome aboard.

Student accommodation rarely makes for a good investment – especially if you're searching for capital growth. On the surface, the rental yields may appear strong but high holding costs can quickly erode those returns.

Banks aren't a huge fan of them either – you'll require a large deposit to get the deal done.

All in all, they're not my favorite IP type – but some people do buy them.

Cheers

Jamie

Property management fees can be quite high.

Cheers

Jamie

Hi Scott,

  Welcome, and well done for asking the question.   A major part of "due diligence" is in asking questions and finding answers to questions that are "hidden" or not usually outlined during the purchase of a property.   i.e. Looking for the exit even before you buy, financing the deal, gathering input for a SWOT analysis, Council codes, demographics, etc.

  A friend was badly tripped up some years back – "oh yes, we'll give you finance up to $xyz to purchase that property" (the property would have grossed a 15% Rent Return).  He went ahead, won the auction, and then couldn't settle – "Oh no, we couldn't give you a loan since you are renting to students!"   The lenders knew of that upfront and nothing adverse was mentioned, but pulled the rug out once the deal was done.   Maybe the one saying "Yes" was a keen adviser wanting to meet a quota for the month ???  The REAL decision maker pulled the pin – knowing of such "hidden details" is part of due diligence.   So, if a lender says "Yes", be SURE it really is a yes before you commit.  Get the terms in writing as part of a Loan Approval document.

  Back to your situation – in what area are you looking?   Major Aust city?  Are you looking at just one apartment in a block, or a suite of 4 or 6 in the one building? 

  If you now have some doubts re "student accommodation", is there another area of Property investing that is of interest to you?  If you still wish to have a closer look, do add more information re your specific circs – others might be able to add value from past experience in that area (both good and bad). 

 Re the "Capital Growth" part of your question, do think long and hard about the old adage – "You make your money when you BUY, not when you sell".  To that end, how can you generate your own Capital Growth in the area you are thinking of?   Are you buying to renovate (thus adding value), or buying new (and paying the developer his 20% as part of the asking price)?   …another one to think long and hard over…..  

  Let us know what you think – we may be able to assist you further as you go.  

Benny 

If you are looking at Melbourne, there is an over-supply of student apt accomodation in my opinion. There are makor issues in finance for accomodation, as well as issues such as Jan-Feb when students head off overseas.

In Melb, look at any suburban area where there is a Uni, say Burwood, Chadstone, Bundoora apart from the CBD, there is a heap of accomodation 'available' for students, without knowing the vacancy rate, that should provide enough of a 'concern' not to proceed and consider another option (as mentioned by Nigel above)