- jgursahaMember@jgursahaJoin Date: 2006Post Count: 2
I am a fairly inexperienced investor and the only property I bought with a lot of caution was my own home. I am now interested in getting into property investing.
What I wanted advice on was studio apartments in the Melbourne CBD. I noticed their price and it seems that the rental income against the interest only mortgage repayment is generating a positive cash flow. On top of that there will be tax breaks on the repayments.
Is it really as good as it looks. I guess such small studio apartments have a downside of low capital growth. However I think one can have a combination of cash flow generating and capital growth (negatively geared) properties in one’s portfolio.
So to start of my investment this seems like a low priced option and will also generate me cash flow. What are people’s thoughts on it? Is there something I am missing?
Thanks in advance.
JGAlistair PerryParticipant@aperryJoin Date: 2004Post Count: 891
There are a number of problems with these sorts of properties. Principly, they are very difficult to finance, lenders do not like them. So you will find you either have to put in a large amount as a deposit or pay very high rate. In most cases, when this is taken into account, they are not attractive. You can get better terms on a commercial property if you are after cashflow.
Alistair PerryBDMParticipant@bdmJoin Date: 2002Post Count: 93
APerry is right – absolute bare minimum deposit a bank would require is 30%, but quite probably more likely to be closer to 40%.
Body Corporate fees in these Melb CBD apartments are enormous – lifts, pools, garbage collection, gyms, etc. A “cheap” fee ( ie building with just one lift ) would be $200 + per month…yes – per month = $2400 per year.
Capital Gains – very low to ordinary. This is largely because while in an inner suburb “they” are not making any more land (scarcity value) in the CBD “they” ARE making heaps more apartments.
If you do have your heart set on a small apartment, a suggestion would be look at somewhere near some form of tertiary educational facility, eg Hawthorn / Glenferrie, or Burwood, or Carlton, or Footscray, or Monash.
Banks often have a “minimum size” for properties – not just in the CBD. Studio apartments often are under this “size”. In this case, again they will require a big deposit.
This is purely food for thought, and in no way am I trying to discourage your plans.
My theory is – go sick. But perhaps go sick carefully.
BDMtiger1Member@tiger1Join Date: 2006Post Count: 2
We’re mortgage and investment property brokers based in Sydney and constantly deal with developments promotional material and consistently find that rental data quoted is usually on the optimistic side. Locate and contact independent property managers from real estate firms in the area and then ask them their opinion. You’ll find this will save you a lot of regret.
[email protected]DerekMember@derekJoin Date: 2004Post Count: 3,544
This topic comes up quite regularly as the ‘returns’ to appeal to the beginning investor. However there are some pitfalls finance being one of them. WHile these properties may appeal they do suck up more equity than they return and as such without careful consideration can hold your investment journey up.
I would also be wary of buying such property as they really only appeal to investors as home owners seek elsewhere. As a result of this you are at the mercy f the niche investment market.
Recommend you also do a search to see what other information is contained within the forum. Scroll your mouse over the forums button at the top left of the page and you’ll see the search facility.
All teh bestJulianMember@julianJoin Date: 2003Post Count: 232
Do you know it is not eaily to get a loan for a studio?
THERE IS ALWAYS A BETTER WAY!giddoMember@giddoJoin Date: 2005Post Count: 152