Had a conversation with my tax accountant about Melbourne property

Basically…

Some of the opinions she offered, such as “buy apartments rather than House” and “people are starting to not prefer big land as generations go on”, are quite against many suggestions I learned from experienced property investors.

So I am interested in hearing from experienced property investors as what they think of opinions provided by the accountant?

Hi Nigel

The suggestion given today is that with Melbourne CBD never have a shortage of Overseas Uni Students, especially Chinese Overseas Students, rental increase has been solid for years and the demand for such “student accommodation” will not die down any time soon.

So the option of “buy a ‘student accomidation’ and then rent only to Chiense overseas students and collect good cash flow” is one option that come up in our topic….

I haven’t drilled too much into details and specifics.

The way how I was presented those information is like this. It may or may not add up, but at this stage, I am not making any decision nor am I committing myself to anything. I just thought I’d list down that and share those information, that’s all.

1. When those new apartments are being constructed, she doesn’t buy them, nor does she make referrals to people who she knows, because she knows they will be sold at premium price.

2. But one way or another, some “problematic apartments” come up, and fail to settle. The reason behind failing to settle can vary, but a lot of the time, this is due to either marriage break down or people who cannot get finance in time (such as now Chinese government are tightening up overseas money transfer so that slowed down and that caused many Chinese buyer to unable to settle).

3. When this happens, the “initial” buyer more often than not looks to get rid of them quickly, and that’s where bargain are stroke, and this is when she buys (or pass on the information to people who she thinks will be interested).

4. Whether she makes money in between, I don’t want to guess, but she said for her, it is just a flick of email at her end.

5. Usually when those properties “fail to settle”, they tend to be re-sold by the initial buyer, but at a lower value. To give an example, the initial buyer might have bought it at 500K because that initial buyer bought it in a “conventional manner” at premium price, but due to failing to settle but needing to get rid of it quickly, they may re-sell it for 400K or less, and that’s how much she pays (or how much I would pay if she refers them to me and I decide to buy it).

6. Yes, I am fully aware of apartments in places such as Southbank and Dockland are performing crap. I personally know someone who bought apartments in Dockland years ago and now regret buying it.

7. But then, coming from my personal experience, I know Chinese Students much prefers apartments close to school. I had 2 cousins who studied in Melbourne, 1 went to Melbourne Uni and 1 went to RMIT. They both stayed at my home initially (where I don’t even charge them rent because we are a family) and yet both voluntarily moved out and moved into “student apartments” close to their school despite knowing they pay much higher rent there (they pay something like 500+ per week, which I think is crazy)

8. I also use a Chinese social app on mobile called WeChat, where there are Social groups that are created with 500 members specifically to talk about overseas students accommodation. There are frequently students who lease term is about to expire and look for the next student to move in, and rather than posting them using conventional methods, they use that WeChat group to advertise and usually those apartments / Units are the first to be taken away.

For example, I recently purchased a new 5 bedroom home and after my family moved in, we still had 2 spared bedrooms. So I posted the spared bedrooms in that renting group on WeChat, I advertised them for 170 and 160 per week, and they are taken after 3 weeks of advertising, and now I have 2 tenants living together with my family.

But those advertising in the same WeChat renting group for student apartments close to Melbourne Uni or RMIT or one those universities, they are usually advertised at between 500K – 650K per week (crazy in my opinion), and yet they are always gone in less than 1 day.

So it is very interesting to see at one hand, rooms are taken by new tenants very quickly in social apps like this, and yet “statistically” they don’t perform well.

Basically, Chinese students don’t bother go to real estate agents or anything like that, nor do Chinese landlords. They use WeChat for that purpose when targeting Chinese overseas students market.