Managed Apartments

[pango]

Has anybody had any negative experiences with managed apartments.

I am in discussion with an agent on a 1 bed studio apartment in central CBD currently under 7 year lease with major company.
Returns around 13k after all fees and charges.
Purchase price 220k.
The building is 3 years into the 99 year arrangement, the apartment is 6 months into the current 7 year lease agreement, the management company fully refurbs the place every 7 years at no cost to the owner. Not sure yet where it is in the 7 year refurb cycle yet but agent says that purchasers are enjoying positive gearing after depreciation etc.

What should I be careful of here. ???
I have 3 IP houses and am looking to add something smaller and different to the bunch.

Pango.

 

[Rob Williams]

Interestingly, I'm looking at a similar strategy to complement my current portfolio.
I've got a few buy and holds that are -ve geared.
Despite the majority of folks recommending steering clear of such apartments, due to the limited CG potential, I still see some value.
I'm looking at 1BR apartments in the Melbourne CBD, more specifically, those in nice, heritage buildings.
My preference is for 7% + net return and no more than 5 years remaining on the contract.
My thinking is that I'll generate an income stream (assuming and LVR of around 50% or so) for 5 years. After that, I can move into it myself (I spend so much time in Melbourne and love it so much, I might as well live there) or allow it to roll over to an owner occupied rental.

 

[pango]

I agree that there is still value to be had despite the "probable" poor CG.
My strategy would be to get some high 5 low 6% IO money for 5-7 years, given that the tenancy is in place, and all going well, think about it again in 2014.
Im betting that it will be worth north of the current purchase price.

My reservations lay in the unknown territory of dealing with an IP that is managed in this way. I expect there are some horror stories about buyers being duped into a property that is due for demolition or something similar. The gold/sunshine coasts have had many casualties over the years, people losing their shirt due to some pathetic management system that can't be replaced or negotiated with.
I do like the fact that a major corporation has the lease for 7 years. I think they have their offices across the road, so must be convenient to stick their Exec's in there when they are in town and the like.
Anyway, thanks for the reply Rob. I have just returned from Melb myself. Had my eye on a lovely place in Nth Carlton, but I couldnt get the numbers I needed to make it viable(cashflow neutral).
Cheers

 

[boomtown]

Due a search for "Quest". Lots of discussion on this board.

 

[joelucie]

my question is how poor the CG of apart. is in Melb? thanks

how poor the CG estimated in Melb? 2% on small apartments for next a few yrs?

any comments?

I agree that there is still value to be had despite the "probable" poor CG.
My strategy would be to get some high 5 low 6% IO money for 5-7 years, given that the tenancy is in place, and all going well, think about it again in 2014.
Im betting that it will be worth north of the current purchase price.

My reservations lay in the unknown territory of dealing with an IP that is managed in this way. I expect there are some horror stories about buyers being duped into a property that is due for demolition or something similar. The gold/sunshine coasts have had many casualties over the years, people losing their shirt due to some pathetic management system that can't be replaced or negotiated with.
I do like the fact that a major corporation has the lease for 7 years. I think they have their offices across the road, so must be convenient to stick their Exec's in there when they are in town and the like.
Anyway, thanks for the reply Rob. I have just returned from Melb myself. Had my eye on a lovely place in Nth Carlton, but I couldnt get the numbers I needed to make it viable(cashflow neutral).
Cheers

 

[buzzlightyear]

At between 30-50% deposit required for these types of property purchases, it chews up a quite a bit of cash. You would need to make an assessment if that works for you.