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From: John Shadow
I am currently looking at buying an apartment in Melbourne city from a large hotel chain. They give you a 10-year lease with 3 x 5-year extensions starting with 6.5% return on the purchase price. Rent increases at 3%pa and is reviewed every 5 years. They also pay all out goings except council and water rates.
With all the depreciation of the new property and furniture, it is cashflow positive for at least 10-years and it seems like a good deal. The prices are factored up quite high to give the 6.5% rental return.
I am wondering what the down side is? Where can I get stung? The things I can think of are:
* what if the company goes bankrupt and dumps the lease?
* what do I do in 10-years if the lease is not renewed?
* the price is higher than normal because of the long term lease.
However, these are not deal breakers. are there any other risks I should be aware of?
All comments and suggestions are warmly welcomed. Thanks.
I am currently looking at buying an apartment in Melbourne city from a large hotel chain. They give you a 10-year lease with 3 x 5-year extensions starting with 6.5% return on the purchase price. Rent increases at 3%pa and is reviewed every 5 years. They also pay all out goings except council and water rates.
With all the depreciation of the new property and furniture, it is cashflow positive for at least 10-years and it seems like a good deal. The prices are factored up quite high to give the 6.5% rental return.
I am wondering what the down side is? Where can I get stung? The things I can think of are:
* what if the company goes bankrupt and dumps the lease?
* what do I do in 10-years if the lease is not renewed?
* the price is higher than normal because of the long term lease.
However, these are not deal breakers. are there any other risks I should be aware of?
All comments and suggestions are warmly welcomed. Thanks.
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