University apartments. Too good to be true.

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From: Jim Kouta


Hi,

This is too good to be true! Apartment in Carlton(Melbourne) going for $290,000. Apartments are managed by Melbourne University(YMCA). Rent per month is $1620 guaranteed for 10 years. After that, either re-leased or open to public. Apartments are only 2 years old. That's a tremendous return, best return I've ever come across. What is the catch here folks?

Anybody come across these schemes before and are these a safe investment? Don't know about you, but I have my suspicions. Please enlighten.
 
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Reply: 1
From: Owen .


That rent won't cover the interest on a $290k loan at 7%.

290000 * 7% / 12 = $1692 per month required.
 
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Reply: 2
From: Ian Findlay


Jim,

Only disadvantages I can see are:
1. Return less than 7%, might be good for melbourne but poor for Brisbane.
2. Students can be poor tenants, young, party = damage etc. This is a
generalisation of course but just something to be aware of.
3. May not be near city centre and therefore perhaps lower capital growth.
4. Size of apartments, if less than 50sq then lenders may not lend.

Otherwise sounds great. What %age does the YMCA want for managing them?

Ian


> From: "Jim Kouta" <jam@hotmail.com.au>
>
> Hi,
>
> This is too good to be true! Apartment in Carlton(Melbourne) going for
$290,000. Apartments are managed by Melbourne University(YMCA). Rent per
month is $1620 guaranteed for 10 years. After that, either re-leased or
open to public. Apartments are only 2 years old. That's a tremendous
return, best return I've ever come across. What is the catch here folks?
>
> Anybody come across these schemes before and are these a safe investment?
Don't know about you, but I have my suspicions. Please enlighten.
>
>
>
> To reply: mailto:propertyforum.5211@bne003w.webcentral.com.au
> To start a new topic: mailto:propertyforum@bne003w.webcentral.com.au
> To login: http://bne003w.webcentral.com.au:80/~wb013
>
>
 
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Reply: 3
From: GoAnna !


Hi Jim

Does the rent automatically increase each year at an agreed percentage? Are there market rent reviews? Are out goings paid by owner or leasee? Is there a commercial lease in place?

My experience with a serviced apartment in Flemington is that the returns have been great and higher than other rentals however capital gains is lower than similar properties in the area. This is partly because the buyer market is smaller as owner occupiers would not be interested and also due to funding policies of banks.

GoAnna !
(aka Anna before she got real)
 
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Reply: 3.1
From: Les .



And, the "old chestnut" of University accommodations, do you receive this amount EVERY month, including when University students are on Xmas vacation?

Regards,

Les
 
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Reply: 4
From: Terry Avery


Are they one or two bedroom apartments. How many square metres? Need more
information to comment. At $290k the yield is 6.7%. If the rent is
guaranteed for 10 years is it reviewed annually? In the review is it marked
to market or adjusted to the CPI? Investors in DHA houses in Darwin were not
happy when after the first year the rent was adjusted to market, down 30% or
more. Would your plan be able to cope with that if the rent were reduced to
4.7% yield after 12 months?

Cheers

Terry
 
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Reply: 5
From: Michael Yardney


Jim
If it's too good to be true, it probably isn't.
With this type of apartment its a bit like buying a serviced apartment. You are buying a stream of cash flow, rather than a real estate investment. In general these type of properties have poor capital growth, lots of maintenance and you have little control over them and minimal opportunity to improve them and increase their capital value.
Michael Yardney
Metropole Properties
 
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Reply: 5.1
From: Jim Kouta


After having a chat to a few others about this and reading your comments, the idea isn't as great as I first thought. A little inexperience I suppose.

Thanks for all your comments. I now have $290k to invest somewhere else.
 
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Reply: 5.1.1
From: GoAnna !


Jim

As a matter of interest (to the discussion) can you please post the details of this deal including the questions I asked above. I would be interested to hear on what basis you have decided not to go ahead.

Thanks

GoAnna !
(aka Anna before she got real)
 
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