Serviced apartment strategy

[mech81]

Hi guys,

Great forum you all are running here. Been looking through the last few days and have learnt a lot.

I'm a beginner Property investor with my first IP under my belt last year. I'm looking to add another by the end of the year. I'm thinking of buying a serviced apartment who's lease is running out say in 2-3 years time and then convert it to a normal residential apartment and then refinance it to pull equity out for my next IP.

Has anybody had any experience with this? Is this strategy just a dream due to contractual legalities or is it possible? If possible, what sort of quicksand issues should I be looking out for? Cheers

 

[Rolf Latham]

Hi

Few things to look out for

Not many lenders will do these at reasonable LVRs, many lenders look at them as a commercial proposition, hence u need a busload of deposit.

Try and get something of decent size > than 50 m ideally. Some lenders are going down to 40 as mins, but for max market appeal ( and thus hopefully a higher val) id look for 50.

If the unit is in a restricted Postcode or building. Some lenders have full on black lists for some properties, and wont lend above lowish lvrs for certain "high density" projects. Be aware that yiur Idea if high density and say a mortgage insurers could be VERY diffferent. 35 units in one dev can be high density.

The finance side of this equation may be the area where you need to do the most work on

ta
rolf

 

[mech81]

Thanks Rolf. The apartments I'm looking at are definitely more than 50m2 as under 50 for a normal apartment some lenders baulk at. Is there a way of finding out if the building is in a restricted postcode or building?

I'm just as concerned regarding the leases signed by the previous party. Are there any clauses i should be watching out for?

I'm looking out for serviceed apartments that are in blocks that contain residential ones too... is that a good thing?

Cheers