Shafston University Accomodation - a tragic story

[grubar30]

You might have seen them listed on realestate.com.au…dozens of student accommodation units for sale in Shafston University at Kangaroo Point, Brisbane…approx. 27 m2, 2 bed type apartmemts, geared towards the overseas student market…..

http://www.realestate.com.au/cgi-bi...0&p=10&t=res&ty=&snf=rbs&ag=&cu=&fmt=&header=

http://www.realestate.com.au/cgi-bi...0&p=10&t=res&ty=&snf=rbs&ag=&cu=&fmt=&header=

http://www.realestate.com.au/cgi-bi...0&p=10&t=res&ty=&snf=rbs&ag=&cu=&fmt=&header=

http://www.realestate.com.au/cgi-bi...0&p=10&t=res&ty=&snf=rbs&ag=&cu=&fmt=&header=


I’ve monitored these properties with slight intrigue over the last several months, watching their sale price drop from the 180K range all the way down to the 120K’s…. this morning curiosity got the better of me so I decided to ring up the agency in charge of one of the particular listings….to cut a long story short, what I heard was a tragedy - owners having seen their asset drop in value to the tune of tens of thousands of dollars, to the point where some of them have experienced losses of $60-80K in 2-3 years….apparently these units were heavily marketed around 3 years ago with promises of great returns….

However, the realisation soon set in that overseas students only ever came and stayed for 3 month intervals before moving on…so you had this property that was unable to attain long-term leases, say 6 or 12 months, like say a traditional residential property, but rather short-terms ones, which were in themselves sporadic…it was not uncommon for some apartment/units to experience vacancies as long as 6 weeks….


The agent said he hasn’t been able to sell one of these properties in over 12 months…any offers he received were around the 105K mark, which he felt was not entirely unfair given the insecure vacancy rates, but from the owners viewpoint it was a total shock as some of them had originally paid $190K….

There was one particular couple from the Gold Cost who wanted to buy a new PPOR but needed to sell their Shaftson Uni IP to do so…anyway, they were with the Commonwealth Bank who would not allow them to proceed with the PPOR loan unless they sold the IP for at least its original price of $185K….the couple were shocked because they knew the property was not worth anywhere near that…...Bank apparently told them “it's not our problem!” to which the couple stated it was, as it was their valuer who had originally valued the property for $185K…..

oh man, it went on and on…...and it gets worse - apparently, no one wants to take accountability for what’s happened/happening to these properties – Shafston Uni Management played dumb and the banks just don’t care…. And I felt for the agent too as he kept having to take these extremely low offers to the owners who in turn became angry and disillusioned….he was the messenger and he was being shot…..in the end, this agent has decided to not have anything more to do with these properties as he reckons they have been the biggest headache for him….


Moral of the story – do your due diligence!


George

 

[Stewie]

Great post. I had looked at these a little while back but was always concerned with the overseas student bit of the sales pitch.

I feel for those that got caught but thanks for sharing your findings.

 

[see_change]

How long are the current PM agreements for ?

See Change

 

[grubar30]

Yeh, no worries Stewie.

How long are the current PM agreements for ?

See Change

Not sure, but they are currently in the process of changing them due to the absymal situation....Agent said plans are in motion to make the investments work better for owners....not sure if Shafston Uni Management itself does the PM rights or if its an outside company....I guess I could have asked (then again, there was a million questions I wanted to ask) but I felt for the agent - there was real anguish in his voice....


George

 

[lizzie]

this story also shows that you really need to have more than one potential pool of renters for your property - almost the same as it is incredibly risky to buy ips in a town with only one employer.

 

[Simon]

I suspect that these are converted motel rooms - small studios.

If so then they were always going to be a riskier investment and a less desireable place to live for any length of time. I imagine that OS studnets are arriving and getting settled then looking for more permanent digs.

The student market is a good one but I personally would never buy purpose-built student accomodation. My student IP has the advantage of being a large middle class home first and student accm second. I would never make the mistake of valuing it on a standard yield multiple and I guess this is how these were sold.

So whilst my place earns $500+ pw it is no more valuable than the house next door which, in a normal 12 month lease, would get about $300pw.

Cheers,

 

[House_Keeper]

You might have seen them listed on realestate.com.au…dozens of student accommodation units for sale in Shafston University at Kangaroo Point, Brisbane…approx. 27 m2, 2 bed type apartmemts, geared towards the overseas student market…..

27m2 is a warning signal to me. Harder to get finance, unsuitable for long-term accomodation, very limited market.

Is this a new building or a hotel converted to appartments?

 

[Dis]

My student IP has the advantage of being a large middle class home first and student accm second.....So whilst my place earns $500+ pw it is no more valuable than the house next door which, in a normal 12 month lease, would get about $300pw.

Cheers,

What have you done to the property that allows you to ask 500pw if it is really a 300pw type of house? Or are you just renting for 9 months of the year?

~Dis

 

[DCA]

Bank do their own valuation and at the end of the day if you can service the debt and you have assets else where the bank can get their hand on like your PPOR then I dont think they care.
Banks dont have any morality profit and more profit and more cost cutting and when it's not enough they hike the fees and if you are a poor customer it is just tough luck, I dont think they even want you in their bank

 

[Chilli]

There are a lot of private houses around the Kangaroo Point area renting rooms out to students with much cheaper rate so those small studios with 2 beds cannot compete.

 

[Simon]

What have you done to the property that allows you to ask 500pw if it is really a 300pw type of house? Or are you just renting for 9 months of the year?

~Dis

I have increased the bedrooms. I rent to a niche market for 10 months of the year at high rent then I fill it on a casual basis for the summer at about 75% rent.

Works very well for me.

 

[young_gun]

These investments are bad news . In Sydney I looked at something similiar called "Uni share " or something along the lines of this in broadway / ultimo . They are in the old david jones building that was converted into units.

http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2005261156

Anyways these 25 square metre apartments are geared toward the OS uni students. Not only are they small but their strata fees are close to $4,000 per year. At the time I was looking at them , I had acess to RP Data . I checked out the past sales prices and they had virtually no growth in the last 8 years !!!

The other thing about some of these units is the rent is pooled although this does hedge against loss . However its pretty much near impossible to find out when your buying one of these how many are actually no vacated . Buyers beware !!!!

 

[gekko_99]

I saw these shafston college units about 4 years ago, at that time they were packing 2 international students into a small room 26 sound about right. The students typically find they can get together and rent an inner city unit within walking distance with more space for less cost.

 

[sue78]

We almost bought an apartment at Shaftston 3 years ago. We even made an unconditional offer that was accepted. I think $185k unfurnished. But we pulled out because we found out that in the future we couldn't borrow aginst the apartment for our future PPOR. They threatened to sue us but we just ignored it and never heard from them again.

A good example of a blessing in disguise

Omg, we were going to pay cash too! Instead we bought a modern townhouse for $120k and sold it a year later for $195k and we did not have to do any maintenance at all. Tenants were the best. Ther ewas a long term tenant in when we bought it an dthey were still there when we sold it.

However, my sly sis and brother in law bought one of those apartments!! we didn't find out until months later. I think they heard about us buying one so went and checked them out themselves. They were probably smirking when we didn't end up buying ours but they bought one still....they're a bit competitive.

Parents must be mad to send their kids there! did anyone not heard what happened on current affair a few years back that resulted in the 'principal/owner' getting fired and he's probably still in exile overseas? he was paying japanese female students for sexual services!! he was caught on camera by current affair in the car park!!

It was in the papers for about a day only. I think there was government intervention as the overseas student market is worth $$$$$$$$

 

[sue78]

In regards to the bank valuation...unless you have equity or a big deposit, banks won't len for a property that small. So I'm sure the banks are covered anyway and they probably did not value it at the original price.

Which makes it even more sad as I'm sure most people who own these apartments mortgages it against the equity in their PPOR or other IP's so if they can't service the loan, it becomes a mortgagee sale, but if the proceeds isn't enough to cover the loan, the bank then has the right to sell the security to get their money back.

 

[grubar30]

Parents must be mad to send their kids there! did anyone not heard what happened on current affair a few years back that resulted in the 'principal/owner' getting fired and he's probably still in exile overseas? he was paying japanese female students for sexual services!! he was caught on camera by current affair in the car park!!

It was in the papers for about a day only. I think there was government intervention as the overseas student market is worth $$$$$$$$

Sue,
What a sordid and fascinating insight....it just keeps getting worse with these units...your very fortunate you didn't buy one

How is your sis fairing?...does she still own it?

 

[Aceyducey]

Parents must be mad to send their kids there! did anyone not heard what happened on current affair a few years back that resulted in the 'principal/owner' getting fired and he's probably still in exile overseas? he was paying japanese female students for sexual services!! he was caught on camera by current affair in the car park!!

What a scandal. Paying overseas students for sex! (and they probably didn't have working visas!!)

He could have gone to a legal brothel and paid staff who may have included Australian-born university students instead.

PS: I knew someone (former friend, largely lost touch now) who used to operate and work in a 'private house' to earn her way through uni. It worked very well for her and paid her HECS charges as well as the mortgage.

Cheers,

Aceyducey

 

[sue78]

Sue,
What a sordid and fascinating insight....it just keeps getting worse with these units...your very fortunate you didn't buy one

How is your sis fairing?...does she still own it?

They don't talk about it to us but mil has mentioned that those units have given them loads of hassle. They can be vacant for weeks at a time and often they are only rented out to one student instead of two. They charge $150 per student per week. If they have two students renting then I think they may be positively geared....they bought the cheapest apartment with no river views for $169k. A wise move as there were units up to $210k with water views. They charge $50 per week weekly servicing of the apartments.

Mil also mentined that they were thinking of selling but then decided not to, probably because of the losses I suspect or the fact that they can't sell it.

I know they used their own PPOR as security, however, mil lent them all the money for their PPOR so the bank thinks they own their PPOR outright. They are very lucky to have an interest free loan! They still have plenty of equity and serviceability to buy more properties so they're probably not too fussed.

 

[grubar30]

What a scandal. Paying overseas students for sex! (and they probably didn't have working visas!!)

Cheeky Acey...



Sue, thanks for that....some great insight

OK, it's official now - these units are a NO-GO zone....they're White Elephants - ie, more trouble than they're worth....

George