Serviced Apartments???

[turk]

So what do you think about the strategy of buying one with only a short time (say, 5 years) left on the commercial contract?
My thinking is that a well chosen apartment in a great location and nice building will show decent CG once it's released from the contract and becomes available to owner occupiers.
This assumes you're prepared for the lower LVR going and you're wanting positive cash flow during the contract term.
I'd be interested in your thoughts on this ..
Thanks,
Rob

Hi Rob

I imagine once the unit is released from the contract you may be able to
refinance to take the extra equity out.

Cheers

Pete

 

[Property Meister]

So what do you think about the strategy of buying one with only a short time (say, 5 years) left on the commercial contract?
My thinking is that a well chosen apartment in a great location and nice building will show decent CG once it's released from the contract and becomes available to owner occupiers.
This assumes you're prepared for the lower LVR going and you're wanting positive cash flow during the contract term.
I'd be interested in your thoughts on this ..
Thanks,
Rob

so with serviced apartments, when "Quest" for example, do they buy the entire building and then sell it to investors for a fixed term eg 30 years, and once these leases expire the owner is free to do whatever they want???

so basically once the lease had finished you'd have left a quest labelled apartment eg the signage etc. etc.

so if you were going to onsell it, wouldn't the price be either much higher or much lower because you no longer have quest managing it??

i'm very curious on generally what happens when these serviced apartments had finished???

 

[landlubber]

So what do you think about the strategy of buying one with only a short time (say, 5 years) left on the commercial contract?
My thinking is that a well chosen apartment in a great location and nice building will show decent CG once it's released from the contract and becomes available to owner occupiers.

a) Don't know if you'd have trouble with Council Zoning on that one. That would be a "big one" to check. I'm not an expert, but coucils have a way of "putting big rocks in your path". If they can "stop" Triguboff, they can beat anyone!

b) I couldn't live in one. All the ones I've seen ( and there may well be exceptions) are basically a glorified hotel room, even though they call them an apartment. But ...it never fails to amaze me what some people are happy to call home. Different strokes I guess.

Good luck
LL

 

[Rob Williams]

i'm very curious on generally what happens when these serviced apartments had finished???

The one's I've looked at have been in buildings which are essentially strata buildings with an apparent mixture of owner occupied apartments and those under contract to the serviced apartment company.
I would imagine that someone like Quest or Sebel would be keen to keep the lease going if their occupancy rate was sufficiently high. Less keen if that wasn't the case.
YMMV

 

[GoAnna!]

So what do you think about the strategy of buying one with only a short time (say, 5 years) left on the commercial contract?
My thinking is that a well chosen apartment in a great location and nice building will show decent CG once it's released from the contract and becomes available to owner occupiers.
This assumes you're prepared for the lower LVR going and you're wanting positive cash flow during the contract term.
I'd be interested in your thoughts on this ..
Thanks,
Rob

I am only me and not Rolf but I think your plan has merit and you should enjoy a nice cg at the end of the lease. Just triple check that no further options have been granted and the Body Corporate fees which can be very high.

 

[Rob Williams]

I am only me and not Rolf but I think your plan has merit and you should enjoy a nice cg at the end of the lease. Just triple check that no further options have been granted and the Body Corporate fees which can be very high.

I'm not Rolf, either. Thanks for the advice. I'm still looking at options.
Another strategy I'm looking into, having run into some serviceability issues, is paying down the debt on a freehold property that I've used to provide 20% equity on two other loan deals. If I put some cash into that idea, then I walk away with freehold title to that property and my outgoings in interest payments are reduced. Then, I have something to put up as equity (the title) and improved serviceability.
Not sure the bank sees it my way. Give them time. They all come around in the end

 

[fordmodelt2001a]

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

My Quest apartment in NSW has been an absolute disaster. After all the apartments have been sold to investors, Quest then sell the franchise to an operator who becomes the tenant and has bought the right to use the Quest name for the business. If you end up with a bast*rd tenant as we have, the lease allows them to rip off the owners left, right and centre. After the first 5 years, the tenant offered us a 35% reduction in rent for the next term and we have been fighting through the legal system ever since. Our tenant simply makes deductions from the rent whenever he feels like it, often with no notification and no paperwork to show what work was supposedly done on our behalf, without our approval. Apparently most serviced apartment leases in NSW are based on the Quest lease, and my advice would be not to touch any of them with a 10 foot barge pole. The system in Queensland for all serviced apartments is much better as the owner always has the option to terminate the lease with 90 days notice, so it's in the tenant's interest to work cooperatively with the owners and keep them happy.