Hello all,
I have found an appartment in Brisbane CBD which is part of a hotel rental pool. The rental return is quite good and garaunteed for two years. Has anyone had experience with garaunteed rental returns, especially with Oaks Hotels?
I asked what happens after the two year period? (which the agent was keeping rather quiet). She explained rather shortly that you just renew the contract and renegotiate. Is this something I can get stung with later on?Any and all information would be greatly appreciated,
Cheers,
N
Hello Tremelo
Please do your homework. Find out all the expenses, body corp costs, commissions etc… have they been deducted?
Regards
Demkel
I can’t address the property you are looking at and know nothing about the hotel market, but as a generalisation, if a rental guarantee is offered, you would need to find out the prices of similar properties in the same area that don’t have a guarantee attached to them. You may find that they have simply added two years rental to the asking price compared to non-guaranteed property, so in reality it is you that is paying the rent.
You mentioned that the rental comes from the pool – what is the occupancy rate of the hotel at present, how does the rental guarantee impact on the rental pool (ie are all of the other owners subisdising the rental guarantee)? What returns are being experienced by the other owners? Most importantly, as pointed out above, what are your expenses ie are you paying a management fee, advertising, traditional outgoings etc? and What is your income – pooled income means that if you own 1% of the units you may be liable for 1% of the outgoings + booking fees/management costs/advertising/building compliance/insurance etc.
Your apartment is a part of hotel rental pool. Then would not the hotel affect any terms or conditions in your deed? I would say make sure about the cost of neighboring area. Don’t be satisfied with guaranteed rental return.
I'm happily generalising but I've stopped wasting time with rental guarantees.
Rental for the property needs to be guaranteed as obviously without it noone will buy it.
If you guarantee it for 20 years, perhpas I'll look at it. However 2 years goes by in a flash, after that the hotel has access to my property without having to front the cost of keeping it, and they just transfer the risk from themselves to you. That's basically what it boils down to. They do it because hotel is highly volatile industry.
Better / safer investment else where.
guarantees are not really worth much. If things go back and everyone starts calling in the guarantee the company can go under and then you will have nothing.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Others have pretty muched covered it all here, and hit the nail on the head about checking market rental levels etc, and that the 2 year guranteed rent may be soley in place to make the investment appear attractive to get them sold, and in fact may being drip feed back to you from your inflated purchase price.
I never invest in a property that i dont have control of the property and the rental income. In this situation the occupancy and rental level is dictated to you by the hotel management company, and you cant do anything about it.
My advice is keep well away from this type of investment. Stick to properties where you have all the control.
Thanks for all your info, I was only expecting a reply or two but 7 in one day is pretty impressive.
I have done some further research and pasted a link below.
http://www.hotspotting.com.au/index.php?act=viewArticle&productId=11
I will be giving the hotel pool a big miss after reading all of this. However there is the option to buy the apartment and lease it out myself as a resedential IP. The prices don't seem too inflated as the building is virtually brand new and the body corp fees are reasonably low also.
The only thing is that there may be an oversupply of these style of apartments which might lead to high vacancy rates. There has been a hold put on 3 more residential towers being built in the Brisbane CBD which also indicates oversupply. Can anyone else clarify this?
Cheers,
N
Hi Tremelo,
Send a an email or or a private message detailing the property and i will give you a CMA for the area and can give you an idea on whether you are paying the right money, what resales in the area have been etc…oh and don't worry I don't deal in Brisbane CBD so wont try to sell you anything.
Tremelo wrote:Thanks for all your info, I was only expecting a reply or two but 7 in one day is pretty impressive.
I have done some further research and pasted a link below.
http://www.hotspotting.com.au/index.php?act=viewArticle&productId=11
I will be giving the hotel pool a big miss after reading all of this. However there is the option to buy the apartment and lease it out myself as a resedential IP. The prices don't seem too inflated as the building is virtually brand new and the body corp fees are reasonably low also.
The only thing is that there may be an oversupply of these style of apartments which might lead to high vacancy rates. There has been a hold put on 3 more residential towers being built in the Brisbane CBD which also indicates oversupply. Can anyone else clarify this?
Cheers,
N
There is some very good info in the article on that link you posted. I have seen so many situations where people have been sucked into investing in these horrible things, and the majority have ended badly.
Rent gauranteed for twelve months means that you pay extra for the purchase. The company figures how much it will cost to have the property vacant for that long and then adds it on to the price. So effectively your paying your own rent.
The other thing to be wary of is that the hotel controls the building. Don’t count on your body corp fees staying low long term. They are likely to be able to increase them anytime they want.
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