We recently purchased a hotel room (which returns a positive cash flow) using equity in other investment properties
The unfortunate mistake we have made is that it is restricting our borrowing capacity as the Banks will not take security over properties which are less than 50 square metres in area.
As such, we are now condidering selling this investment. Does anyone have any suggestions?
Thanks
Tb
Hi tbsuper1,
I am no expert on this matter, but I thought cross-Collateralizing like that was generally not an advised structure as it complicates things. My understanding of that structure is if you lose one place you can lose them all.
From what I have picked up on the forums, it is the prefered method to use the equity in a property to get a LOC and then use that as a deposit to fund the next purchase.
As I said, I am no expert so please correct me if I am wrong.
Tb
I believe some banks will give a 60% LVR on property under 50m2 they certainly did with me and I was able to take a seperate loan from equity in principal place of residence therefor having no cross collateralization as there was three seperate loans.
Dave
Hi tbsuper,
It is possible to get finance on properties below 50sqm as long as the hotel is under 10 storeys and the unit is above 37sqm. There are lenders that will go as high as 95% on serviced apartments (but on higher rates that kill the yield). As Davel said you could get a 60% lend from a bank at a reasonable rate.
Kind Regards,
Cameron Perry
Finance Director
Perry Financial Strategies
Level 13, 30 Collins St
Melbourne VIC 3000
Ph (03) 9662 1999
Fax (03) 9662 2044Hi,
I am in the process of getting a hotel room/apartment and was wondering if you thought It was worth while since you already have one. You said that it was a +CF. Are the returns reasonable? I have done many spreadsheets to predict what the returns will be but am finding it hard as I dont know what the running expenses will be. Ive been told to expect between 33% to 50% total, so Ive done my working outs on 45% with an occupany rate of 50% (worse case I hope). Obviously every hotel is different, but can you give me an idea of running costs. We have also been offered 6.5% nett return for the first year or we can go in a pooled income. What option sounds best?
We are going thirds in the apartment room so I am only going to need to put in a 12% deposit and 65% will be a joint loan. Did you get your loan through a bank?If you have any thoughts or information that would be of help, I would greatly appreciate it.
Regards
Julie[thumbsupanim]
70 / 75% is available at standard Bank rates dependant on the terms of the lease.
As Cameron mentioned 95% is vailable from a non bank lender although the rates hurt the returns.
Richard Taylor
Residential & Commercial Finance Broker
**Lodoc Commercial loans from 7.39%**
Licensed Financial Planner
Ph: 07 3720 1888
[email protected]Richard Taylor | Australia's leading private lender
Hi Julie,
There is a world of difference between a hotel room and an apartment.
Which is it you are looking at?
If it’s an apartment and there are 3 people involved in the purchase, is it a lifestyle decision i.e. a place to holiday?
I have a holiday apartment in a managed building. With depreciation factored in, it’s a break even investment. I bought it partly as a lifestyle asset. It’s a 5 hour drive from Sydney (Port Macquarie) and we go there about 3 times a year. When we were little kids, we had a regular family destination and I want my kids to have that, too.
As a pure investment, I’m not sure whether I would have done it, though the capital growth has been very good.
The cleaning costs are a killer.
ScottTax Depreciation Schedules
Australia wide service
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http://www.depreciator.com.auHi Depreciator,
The investment I am looking at is a hotel room in a 4.5 star hotel. It is situated across the road from a beach and it is the only hotel that will be on the beach. There are only two other hotels in the area and they are both quite old so I would hope this one would do quite well because of location and of availability of new hotels.
What is the difference between hotels and apartments???
Someone told me that when you claim depreciation it has to be paid back when you sell. Is that correct???
Your help would be great appreciated!!!
Thanks
Julie[thumbsupanim]
By the way, this is an “off the Plan” Hotel so we are hoping that by the time it is built it will have gone up in value. All hotel rooms have ocean views. It looks good on paper anyway!!!!
Thanks again.
Julie [thumbsupanim]Hi Julie,
applogies for not responding earlier.
Our total cost for this Hotel Room (which is less than 30 square metres in size and comprising a room with an accompanying bathroom) was $150,000. The tenant is the Hotel Operator who covers all of the outgoings, including (i) body coporate fees (ii) water charges and (iii) council rates. Given this fact, our return is calculated as follows: (Rent Return less Interest Expenses)/Total Cost = ($230p/w *52 – $9930 pa)/$150,000 = $2030/$150000 = 1.3533%
In your circumstance, as you may be liable for the fees, your nett return I suspect will be lower.
Regards
tbsuper2
Thanks tbsuper2
Thank you for your response. Since writing, we have decided against this sort of investment as the outgoings were quite high and the retuns were not as great as expected. Even though the property will rise in value by the time it is built we couldn’t be sure that we could find a buyer that could come up with the 40% deposit. Thank you again for all you help everyone, and hopefully the right investment will come my way if I keep looking.
Julie [thumbsupanim]
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