I have just found a deal to buy a studio apartment (really ahotel room), it is in a hotel on the fringe of Sydney CBD, fully furnished, water views and city views. 25sqm and 4sqm balcony. It is $202 000 and they are offering a fifteen year rental guarantee of $194.23 a week, so that’s 5%. There are no outgoings, the hotel pays strata and body corporate and water rates.
I have never heard of anything like this before. To me it sounds quite good, for i never imagined being able to afford anything in Sydney CBD, however in my naivity what am i missing??
Anyone know anything about this and can give me a hand??
If you think it’s a good deal there is abot 50 of them i think so you can have one too [biggrin]Thank you so much in advance
Tink [rolleyesanim]You may have difficulty getting finance under 50sqm. 5% for a serviced apartment is pretty crap returns, and they do not have a good history of capital growth. If you can’t find a more traditional IP returning 5% put your money in an ING account at 5.25% and you are already in front.
A.
Yes good, bad or ugly!
You say: they are offering a fifteen year rental guarantee of $194.23 a weekI’d want to make very sure that they and their income would be reliable and they are able to make such promises.
Not all hotels are doing that well in Sydney, I know that for a fact!
I mean, a rental guarantee only is as strong as the company/business that promises it. What will happen if they aren’t doing well, if they go bankrupt or something? Is there back-up?
Just do your research carefully!Two of the big four will consider studios under 50sqm. Your maximum LVR will be 80%.
Liz
Mortgage Lender
These things always look attractive at first glance. Understand they are selling them for as much as the market values them! They will be hard to finance and the guarantees are only worth the strength of the company behind them.
All the best,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Tinkerbell,
5% after all outgoings isn’t too bad, I think. Places such as you’ve described might have horrendous Body Corporate fees (if they have a pool, gym etc) so if the company pays for this, then that’s something.
If the company has a deal with a University in Sydney, then your rental guarantee would probably be safe.
25sq metres is very small, Tinker- have you seen how big that is? I know of a place in the city fringes that is virtually NEW, for 200k, and it is about that size, and it yields $240 a week rent, so it’s about equivalent. Of course, you’d have to pay for all your outgoings in the one I am speaking of. (It ain’t mine, by the way, so don’t moderate me- just leting Tinker know they are around :+P )
Tinker, you should have no problem getting finance for this- it might just be you have to pay a 30% deposit. It’s not “hard” to get finance if places are under 50sq metres, it’s just that the LVR changes. It would be the same if you were buying a greater than 50sq metres apartment in the city area- a lot of banks still make you pay a 30% deposit. Banks also have some issues with student accomodation which is serviced. No big deal- you just need more money to get into the deals.
Check out domain.com.au and check out Broadway. There are places there- probably similar to what you might be looking at- small in sq metres, and basically student apartments- for 125k. You just need to check out everything that’s around- and there is quite a bit. The Broadway apartments I am referring to are old though- but right next to Broadway shopping centre. I think those are also managed and rented to students. You should have no problem getting at least 5% for them- I imagine they would rent for around $170 a week? (just a guess)
You would also want to check that the apartment you are looking at has its own bathroom- awful to share bathrooms- gross.
How old is the building you are looking at?
Another PS… I have no interest in the Broadway complex- I just know it exists and always has apartments around the 125k mark- probably something to think about for those who want a cheap entry deal in sydney.
kay henry
Kay,
It isn’t just the size that represents finance difficulties. It is the fact it is a serviced apartment as part of the hotel.
I am not saying it is impossible – just that it isn’t as straightforward as other residential investments.
Also be aware that in a large complex there will always be a number of units on the market. This usually has the effect of setting and even limiting the prices achieved on resale.
As always you write a tremendous post!
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks Simpon- what a sweetheart you are :o))
Tinker- check this one out- seems likea MUCH better deal- 47 sq metres, 170k, and it’s a loft- so it will maintain it’s fashionability (I have NO association with the following apartment, and caveat emptor to all who behold! hehe)
http://domain.com.au/listing.aspx?mode=buy&id=2004409918
kay henry
Yup, I’d buy the property Kay suggested rather than a hotel room. Be wary of anything that says it will guarantee your rent for a specified time. What happens after? I know of cases where the rent is dropped to half after the term is up.
I know there are small 24m2 studios in Glebe for $170k. Or you could buy a house in Perth (Beechboro) for the same price.Thanks all heaps for your help!
The more i look into it, the more i see it is not the best way to go. I get so excited when i first find things [biggrin]
Have to control myself.
Thanks Kay for you your imput, Broadway looks like something I’ll look into.
Thanks onece again all
Tink
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