Newbie (one more) - serviced appartment

[Moon91]

Hi

This is my first post.

First of all, thank you for the various contribution, it helps a lot!

In a matter of introduction: Leaving in Perth, looking to buy my first IP soon (3-6 months). Having read few posts since a couple of days. I think I have worked out my goals ( being an income replacement in a 10-15years time frame) and a plan to achieve it (fully own 5/6 IPs generating $70/80k net return).

I am planning to buy close to where i know, ie Perth CBD. I have found only few matches to my criteria ($350k, 5/6% ROI) but not so surprised and keep looking, and expending my area.

One thing came out from my search is the few serviced appartment available (Mantra or Medina) that are below $250k and 9/10% return. My first question is :what is the catch?

I have search the forum but only found old post ( 2006) on the subject.

Thank you for your answer.

 

[Aaron_C]

No. No. No. Only sold to investors, lack of buyers, bad investment.

 

[Shahin_Afarin]

Just google somersoft and serviced apartment so you have an idea of what you are getting yourself into.

Here are some pros and cons:

Pros:

1. Strong cashflow

Cons:

1. Poor CG
2. Difficult to finance
3. Even harder to finance if the lease does not permit O/O
4. Extremely tough valuations
5. Difficult resale due to the above points

Personally I look at them like a plague - I stay well clear of them.

Regards

Shahin

 

[Sean M]

great to see people answering your questions quickly. Could have saved yourself a lot of heartache! Do your DD

 

[Jake Milne]

no. No. No. Only sold to investors, lack of buyers, bad investment.

+1. Dont do it!

 

[Ideo]

I wish I knew of this website a few years back.

Don't do it. Don't even think about doing it. Don't even think about thinking about looking at one, even online.

I managed to get out without burning too much money, but it's not fun.

 

[DaveM]

I think just about every new investor considers a serviced apartment once when starting the hunt. Thankfully most see the issues and move on.

They arent a bad thing to own cheaply inside SMSF for cash... but to borrow actual money for... nope.

 

[Peter 14.7]

+1. Dont do it!

+2 not a good investment at all, Peter

 

[Rolf Latham]

I will counter.

Serviced apartments can make a good investment, even for somebody with a 90% finance need.

However, your typical serviced apartment that is offered with by the commercial operations, where you take all the risk of bugger all of the return is not what I'm talking about here,so I would agree with the balance that most serviced apartments are not an investment for yourself at your stage of the acquisition cycle

Many of my clients have bought CBD or near CBD properties and subsequently rented them on weekly or monthly leases as furnished rentals. The overall return significantly better than a long-term lease to one of the majors, the wear and tear is considerably less, and if correctly finance does not fall into the same restrictions as a normal Serviced Dog


ta
rolf

 

[Peter 14.7]

I will counter.

Serviced apartments can make a good investment, even for somebody with a 90% finance need.

However, your typical serviced apartment that is offered with by the commercial operations, where you take all the risk of bugger all of the return is not what I'm talking about here,so I would agree with the balance that most serviced apartments are not an investment for yourself at your stage of the acquisition cycle

Many of my clients have bought CBD or near CBD properties and subsequently rented them on weekly or monthly leases as furnished rentals. The overall return significantly better than a long-term lease to one of the majors, the wear and tear is considerably less, and if correctly finance does not fall into the same restrictions as a normal Serviced Dog


ta
rolf

Agree Rolf but you are taking about furnished apartments not serviced. I have one and it is great but not for newbie as cash-flow can be erratic. Serviced apartments are scams IMO, Peter

 

[Rolf Latham]

Agree Rolf but you are taking about furnished apartments not serviced. I have one and it is great but not for newbie as cash-flow can be erratic. Serviced apartments are scams IMO, Peter

should have added these are usually cleaned new linen etc once a week

ta
rolf

 

[livewildcard]

Do your DD and get the pro's and con's etc. I think you'll find that in most cases the serviced apartments are just not going to give you the return, security, value, growth etc that say a house or normal unit will give of the same token.

I'm sure there are success stories out there with serviced apartments but for something just to pick up early on in your investment career I'd say might be best to look at other avenues.

 

[Moon91]

Amazing!

That's what I call a good forum!

Thank you all for your advices. Difficult to go against the crowd!

I have noticed though that it may have some potential, but not for me at that stage.

Will continue hunting for a more "normal" IP


Regards

 

[Shahin_Afarin]

Before looking at different types of properties perhaps start with a strategy. From there you can determine what is the best vehicle. You may be surprised with the answer.

Regards

Shahin

 

[Truly Exotic]

nothing more valuable then experience

ask another person who was in a roughly similar situation and age to you who has bought one of these, whether they would do it again,

no point asking a 60 year old with 20 IPS who decided to buy one of these for cashflow for his trip around the country in a campervan for their opinion

 

[Moon91]

Before looking at different types of properties perhaps start with a strategy. From there you can determine what is the best vehicle. You may be surprised with the answer.

Regards

Shahin

Hi Shahin,

I thought I had a strategy as per my first post. Achieving income stream goes by having high yield IP, thus the question on serviced apartment.

Regards

 

[Shahin_Afarin]

Is the 9% yield net or gross?

If you want high income why not consider properties with dual income potential? From what I hear - many suburbs within Perth that has decent zoning. Perhaps someone like Aaron can confirm if this is correct or not?

Regards

Shahin

 

[Moon91]

It is gross (9.5%):

http://www.domain.com.au/Property/For-Sale/Apartment-Unit-Flat/WA/Perth/?adid=2010249526&utm_source=domain&utm_medium=email&utm_campaign=emailafriend

 

[Moon91]

Is the 9% yield net or gross?

If you want high income why not consider properties with dual income potential? From what I hear - many suburbs within Perth that has decent zoning. Perhaps someone like Aaron can confirm if this is correct or not?

Regards

Shahin

Thank for the advice, dual income is a good strategy indeed.

 

[Shahin_Afarin]

9.5% Gross is quite irrelevant. You need to look at the net. Plenty of properties out their that will give you 6.5% net yields plus CG potential and quite easy to finance. The property you have sent is a nightmare to finance.

Always look at the net yield. Do you run a cashflow analysis on the properties as part of your DD?

Regards

Shahin