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
In my opinion this wouldn't work. Reasons as follows...
There would have to be a clause in the COS stating the fact the purchasers had no issues so why would any potential lender no be aware?
I'm assuming that valuers in the area would soon get wind of this.
Even if they manage a way around this, the issues would again raise their head when it comes time to sell the property. You again would be looking at a limited market as you wouldn't have a hope in hell as selling it as a PPOR or to someone requiring say a >60%LVR.
If they sell it as standard with no clauses in the contract a purchaser could tell them to "stick" any agreements they want in place.
I personally see this as being very difficult and a little to risky for my liking. there are plenty of other opportunities out there.