Quest Apartments Inner city investments

Dave, there are loads of threads on these type of investments. I'm hopeless at searching, but you might have better luck. From memory, some of the things you need to consider are:

- minimal growth.
- hard to onsell.
- cleaning costs are a killer (and often not disclosed till after you're locked in).

Scott
 
You have to have cash, all cash, the banks wont lend on this type of security, and you have to be certain the management company is reputable, a lot of the time they are set up by the vendors to suck people in to the high guaranteed yield, and are then wound up a year or two after settlement with you left to manage the property yourself.
 
thanks guys


I guess it makes sense that hotels can afford to offer these guarnetees because they are obviously making a lot more money out of the rooms.

Scott after a bit of a struggle with the search engine you're right there is some decent info already here sorry about that forum.
 
Another thing that might not be mentioned in that string is that the depreciation on furniture can be great, but I think with Quest they own the furniture. Not sure, but it's something to check out.
Scott
 
I personally own a Quest serviced apartment and happy to answer any questions.

Some misinformation in this thread.

Vacancy, cleaning and the usual running costs are not your issue as the landlord. The business operator is responsible for that (and reap the profits if they run it well) Only costs payable are those outlined in the lease.

Check for rent reviews in the lease. Rents can go up down or sideways at this time.

If you have the spare equity, are going in with your eyes open and happy to lock low rates in for guarenteed cash flow then it might suit you. Both pros and cons. If looking for capital growth go elsewhere unless happy to wait for balloon capital growth once lease is finished.
 
GoAnna! said:
I personally own a Quest serviced apartment and happy to answer any questions.

Some misinformation in this thread.

Vacancy, cleaning and the usual running costs are not your issue as the landlord. The business operator is responsible for that (and reap the profits if they run it well) Only costs payable are those outlined in the lease.

Check for rent reviews in the lease. Rents can go up down or sideways at this time.

If you have the spare equity, are going in with your eyes open and happy to lock low rates in for guarenteed cash flow then it might suit you. Both pros and cons. If looking for capital growth go elsewhere unless happy to wait for balloon capital growth once lease is finished.
Click to expand...

Given that the leases are generally 5 x 5 x 5 (well at least the ones I have seen advertised), are they at your option or Quests to renew?
 
buzzlightyear said:
Given that the leases are generally 5 x 5 x 5 (well at least the ones I have seen advertised), are they at your option or Quests to renew?
Click to expand...

Like all commercial leases (as far as I know) the options are the tenants options never the landlords. This is definitely the case with Quest leases which are in effect commercial leases.

Quest will often ask for extra options which may not be in the landlord's interest to grant. It would certainly improve the negotiation position of the landlord if they were one of the few owners not to grant the further option.
 
We own a Quest serviced apartment also, ours is in Darwin.
Contrary to what has just been said, we got a 70% LVR loan with St George (as well as the usual 0.7% discount), there is a finance company in NT that will lend to 80%, but their rates were a bit higher.

We paid 330k for it in 2005, and I know of an identical unit that sold for 400k the following year, and the bank valuation came in at 380k for ours that year also, so there is some capital growth in them.Maybe as Darwin is having a growth period, that had something to do with it.

As mentioned, v.good cashflow, and very low maintenance investment (only pay council rates, nothing else) and I think they can have their place in a portfolio, along with some traditional capital growth properties.I probably wouldnt buy half a dozen of them though, but 3 years on, I have no regrets.
Worst case senario, if the operator went broke (however they look well run from when I have been there) we could rent as a standard unit and get very similar rent, from what I have seen in the near vicinity.

Each location will have to be assessed individually, of course.
 
depreciator said:
Another thing that might not be mentioned in that string is that the depreciation on furniture can be great, but I think with Quest they own the furniture. Not sure, but it's something to check out.
Scott
Click to expand...

This is not correct, we own the furniture, and yes, the depreciation allowances were very good;)
 
Hiya Frin

I think the finance statement made is generally true

Lenders will lend on these things often on commercial terms, and yes there are exceptions.

When only a smattering of lenders will do restricitive LVRs then your growth tends to be limited because of a limited resale market, because of a limited range of buyers ...............cashed investors or SMSF buyers usually.

ta
rolf
 
Each Quest lease differs so check the details.

We do not pay council rates but pay a set sinking fund plus any capital works (not repairs) relating to our individual unit.

We used to own the furniture but as part of lease was bought by Quest after end of first 5 year lease for the cost of $1. They are now responsible for any replacement furniture. Depreciation was good for those first few years with negative gearing (on paper) and positive cash flow (money into the bank). On average my apartment gives me $300 per month which is nice but hardly fabulous.

Ours did grow by settlement day by about 20%, contined to grow for some years but recently has gone backwards! Identical units next door, not Quest apartments, are worth 30% plus more.
 
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When I looked at similar some years back, the cash flows were excellent (around 10%) but the capital growth had been non existant. That's too far bac to be of much use now.

But it appeared that they were ideally suited, at that stage, for people who had cashed in superannuation funds who were looking for an income stream- and not so much geared investors looking for growth.

I'm not sure what your outlook or objectives are. Whether this sort of investment suits may depend on your own aims.
 
GoAnna! said:
In what way?
Click to expand...

Typically 5.5% gross yield with very poor CG profile. Particularly since the buildings have virtually no OO in them. The owners in one of the buildings have gotten together to try to get Quest kicked out - I wish them luck. They should get a nice CG bounce though if they can pull it off.
 
Interesting about the furniture. It seems that not all Quest properties are operated the same way. I guess that makes sense. In some locations, with decent operators, they might be reasonable investments.
Scott
 
boomtown said:
Typically 5.5% gross yield with very poor CG profile. Particularly since the buildings have virtually no OO in them. The owners in one of the buildings have gotten together to try to get Quest kicked out - I wish them luck. They should get a nice CG bounce though if they can pull it off.
Click to expand...


5.5% is not great. You can do better than that even witha Quest apartment....as per start of thread.

I would not expect there to be any OO if its a Quest operation and run as a business.

Let me know if they manage to kick Quest out. I would be curious to find out on what basis they managed to do that. I would have throught a breach of contract would be required.
 
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