re:- service apartments

[kero]

as i searched on realestate.com about apartments, i noticed some apartments listed are not the typical residential apartments. some of these apartments are actually service apartments or similar to 'hotel' rooms. i'm wondering if they are proper real estate or they are selling anything in the name of RE?

 

[House_Keeper]

You need to be very careful with serviced appartments.

The very small ones (under 50 m2) are really hotel rooms. You are not really buying an appartment, you are buying an asset leased by a business. Your returns are dependant on the hotel and there is often few alternative uses.

I would stay away from serviced appartments unless you could easily sell it to an owner-occupier. Some blocks have a mix of serviced appartments and owner-occupier which makes this possible.

Cheers,

 

[The Y-man]

It's a grey line, but I treat pruchases of student accomodation, serviced apartments, hotel rooms etc the same as buying commercial property - the value of the property is to a large degree reflected by the value of the business venture.

Interestingly enough, the loans that most banks offer for these are also in line with commercial property.

So here's a thought - if you are going to look at these, why not look at offices, shops, foctories, warehouses etc?

Cheers,

The Y-man

Seems to be a sudden rash of these.....
http://www.somersoft.com/forums/showthread.php?t=28193
http://www.somersoft.com/forums/showthread.php?t=27948

 

[GoAnna!]

Serviced apartments can suit some investors but as Y-Man said they are really a type of commercial property and the banks treat them as such. This will make resale harder than residential property which attracts a wider market.

There are a number of things you would want to consider.

Are they just hotel rooms or a full apartment?

Is a set amount of rent paid per month or do you only get paid when your room is occupied? In other words is there a set commerical lease in place or are you both business and owner and property owner?

Rates of depreciation can be very attractive. In the early years there is usually furniture etc that is depreciating and the building can usually be depreciated at 4% rather than the residential rate of 2.5%

The tenant or operator may pay all or many of the outgoings increasing your net yield.

The rental yield should be more attractive than comparable residential dwellings.

 

[Pushka]

Well, I bought a serviced apartment in Noosa about 7 years ago. You certainly get a regular income which makes it easier to service any debt arrangements. Capital growth wise it was excellent too. We did take some time to sell, but that was more of a function of the market at the time rather than the property itself.

Depreciation was excellent too!