Serviced Apartments???

[the_one]

Hi Friends,
I am new to property investing and confused with the concept of Serviced Apartments. I was looking at one of the property and it says managed by Quest and there is no Strata or council fees.

How does this work? What is the catch?

Any help is highly appreciated.


Regards
The_One

 

[tubs]

The catch could be that the people who manage it might only rent yours out when all the ones owned by their friends (or the company) are full.

Irregular cashflow could be problematic.

I wont comment on the apartments versus houses debate. You can decide that one for yourself!

 

[the_one]

Hi Tubs,
Thanks for your reply. I understand your point however if I choose to live there then it should not be a problem right?

And about renting...Do I've to rely on them to find me tenant, can I use someone else? Would they also be deciding the amount of rent as well?

Regards
The_One

 

[tubs]

Not certain, but I'm fairly sure that the people managing it for you find you the tenants. Dont think you do that yourself.

Someone else on here might be able to clarify.

 

[SillySausage]

I would be interested to know this as well !

 

[battle on]

I think you would have to check the contract.
I have one where I can pull out of the management company and manage myself if I wish but have to give 90 days notice. At the moment though I am still receiving 6.5% net return from rents so I will let them keep going, saves me some work.

Cheers

 

[chrispy]

As far as I know the Quest apartments are totally managed by them, I believe you cannot live in them

I looked at some in Williamstown and was told by the Agent that they had been on the market for over a year whereas normal apartments were selling like crazy and increasing at the rate of $5k every 2 months whereas the Quest apartments were stagnant.

Part of the problem was that mortgages were only available up to 60% which restricted the resale value.

If you were after cashflow then are are great as long as you do not want to resell or are looking for capital gains

Chris

 

[buzzlightyear]

As far as I know the Quest apartments are totally managed by them, I believe you cannot live in them

This is correct.

I manage Quest as one of our preferred corporate accommodation providers and have looked into these as an investment choice. IMHO, there are better options (and returns) for your investment money..

 

[buzzlightyear]

As far as I know the Quest apartments are totally managed by them, I believe you cannot live in them

This is correct.

I manage Quest as one of our preferred corporate accommodation providers and have looked into these as an investment choice.

A very professionally run company (with good franchisees), however IMHO, there are better options (and returns) for your investment money..

 

[grossreal]

hi all
this is not an advertisement but I will explain another type of service apartment that is on the market and was designed to get over the issue of loan amount and sellability
the units are built as stock standard units and sold as stock standard units and then an after market agreement is made with each unit holder for the rental of the units.
the units cash flow is then divided across the block so it does not matter which unit is leased as the ones in the pool split the income.
the strat is set up that its investor only and no ppor and each buyer agrees that they will not have any issue with regards the units being service appartments.
the contracts are for 10 years and the returns are around the 7% mark
all of the major service appartment chains are looking at these and alot of the higher level chains already have these as one off agreements the difference here is that these are being dveloped as this form of property.
the advantages are
the unit can be sold into the normal unit market as they are standard 1br 50sq and 2br 85 sq units
they have a 6.5% return
they have the growth of the standard unit
and the lender looks at the units as a standard unit with tennant so 80% 95% loans or what ever.
and yes even no docs if setup correct at the start.
there are a couple of groups that just do this type of service apartments.
but they are sold as units first and then when all sold the after market service apartment contract is put on the units.
they are not advertised as service apartments for sale as technically until the contract is signed they arn't and you can't sign until they are built and the loans are in place.
this is just food for thought.
and I will come back and but a few figures on the difference for a standard two br under this system as opposed to a 2br normal unit from say a mertiton of this world.
and for a developer the numbers give you full debt coverage very quickly

 

[GoAnna!]

The catch could be that the people who manage it might only rent yours out when all the ones owned by their friends (or the company) are full.

Irregular cashflow could be problematic.

I wont comment on the apartments versus houses debate. You can decide that one for yourself!

This is actually factually incorrect. Quest offer a commercial type lease on their properties. Like most commercial tenants they cover most or all of the outgoings (this varies from property to property) The cleaning costs, occupancy levels are Quest's issue not yours the landlord. They pay you the same agreed rent each month regardless fo their occupancy rates just as any business pays their rent regardless of the profitablility that mont.

This is often confused with serviced apartments where the landlord is also the business owners an they are often managed by on site managers, In this case out outgoings are your issue as is occupancy.

I am involved in both so I well aware of the differences (only i use my PM for individual properties not a site manager)

 

[GoAnna!]

Hi Tubs,
Thanks for your reply. I understand your point however if I choose to live there then it should not be a problem right?

And about renting...Do I've to rely on them to find me tenant, can I use someone else? Would they also be deciding the amount of rent as well?

Regards
The_One

You can't choose to live there ina Quest apartment uless you paid as per any other resident. It is your building but Quest's business.

 

[chrispy]

I agree with GoAnna - Quest pays you the same amount month in month out, it is a guaranteed rent. If you want to live there then you pay the same as any other guest.

According to those that I have looked at the income increases by 4.5% on average each year. For cash flow it is good but from my research there appears to be little capital gain.

Chris

 

[GoAnna!]

LVR's vary enormously between 60 - 80% as this is a commercial venture. Yield is better (especially when you take outgoings into account) than most residential but there is no flexability and there is a limited market you can sell back into so that obviosuly effects capital gain.

 

[yo yo ma]

As far as I know the Quest apartments are totally managed by them, I believe you cannot live in them

That's correct according to their website
http://www.questapartments.com.au/index.site.opportunities.investment.431.html

 

[Rolf Latham]

Hiya

In general

Not a good look on the finance side.........meaning that resale tends to be a restricted to investors that can stump up 20 to 40 % deposit.........you'd want a mighty good rtn to make up for that loss of gearing.



ta
rolf

 

[attrill]

I had a serviced apartment for a couple of years. I sold it at a profit, but only because the market had changed and investors were accepting lower yeilds. The capital growth will always be linked to increases in the lease, usually linked to CPI.

The reason I went off this investment was the complete inability to increase the yield, through renovation, or any sort of additions. At the time that I bought it I was away a lot, and the appeal was that it was completely hands off. When my situation changed and I was able to spend more time on my properties, I put my money into single houses.

Hope this helps.

 

[buzzlightyear]

Hi Tubs,
Thanks for your reply. I understand your point however if I choose to live there then it should not be a problem right?

And about renting...Do I've to rely on them to find me tenant, can I use someone else? Would they also be deciding the amount of rent as well?

Regards
The_One

The agreement with Quest is a commercial lease, where they have full access to rent out to their customers during the life of the agreement. You will have no access to the apartment.

 

[chara]

Is that mean that quest gonna rent my appartment forever or can they stop renting it?

If one day I gonna sell the appartment, is it gonna be sell it on public or I have to sell it back to Quest?

so basically the advantage is: regular cash flow
the disadvanteges are :
- no access to my own property
- low capital gain

any more advantages and disadvantages?

 

[GoAnna!]

It is structured like most commercial leases. Eg 5 x 5 x 5. You would need to check that particular property as they do vary. If you stop thinking of it as residential it will instantly make more sense. If you lease out a shop you would also not have access to it. Same.

The lease structure gives Quest the option (or not) to take up the lease at the beginning of each new lease. Given the amount they have invested in the business it woudl be unlikely that they would not take up the option. If they don't take up the option then you have a normal residential property on your hands and instant capital gains.

Depreciation is higher at 4%. Usually rent rises of around 4% per annum and reviewed to market at end of lease. Most outgoings covered by tenant.

Confession : I own a Quest property which I am considering selling.

Is that mean that quest gonna rent my appartment forever or can they stop renting it?

If one day I gonna sell the appartment, is it gonna be sell it on public or I have to sell it back to Quest?

so basically the advantage is: regular cash flow
the disadvanteges are :
- no access to my own property
- low capital gain

any more advantages and disadvantages?