All Topics / Help Needed! / are appartments contracted to hotels a good investment?

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  • Profile photo of cs_rlewiscs_rlewis
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    @cs_rlewis
    Join Date: 2010
    Post Count: 53

    Was wondering if apartments located in the CBD a good investment. They are leased to hotels for 5-10 years, and it seems the hotel company pays you guarenteed rent and takes care of the council and water rates. However i think the only catch is you have to hold onto them for the entire lease, and im guessing that the capital growth with these apartments isnt very good, hence why they are quite cheap (170000$ in the perth CBD).
    Any advice is much appreciated.

    Profile photo of Jacqui MiddletonJacqui Middleton
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    @jacm
    Join Date: 2009
    Post Count: 2,539

    no they are terrible.  search the forum for "serviced apartment" to see the discussion on the topic

    Jacqui Middleton | Middleton Buyers Advocates
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    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Then when you have searched past comments and realise you cant finance more than circa 60% you can make your own mind up.

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    Profile photo of cs_rlewiscs_rlewis
    Participant
    @cs_rlewis
    Join Date: 2010
    Post Count: 53

    thanks for the advice. yes i didnt think they were good investment opportunities. It just seems so difficult to get started in the market these days, especially if you are on you own. Even 1 bedroom apartments cost more than $300k, which means you basically need to have a $100K salary to afford it.
    Ive run out of ideas of how to get into the property market!

    Profile photo of INTERNATIONAL EMPIREINTERNATIONAL EMPIRE
    Member
    @international-empire
    Join Date: 2009
    Post Count: 33

    There are many different types of investment properties.

    Hotels are consider as commercial property as far as lenders see it, so they would lend 50-70% LVR. Only some can lend up to 80% but many conditions apply.

    The good part for Hotel investments are they offer fantastic incomes, so your yield could be very high depending upon the occupancy levels and room rates (as they are seasonal). Most Hotel operators would do a income split with you, eg 60/40 or 55/45. eg if you get 4 nights occupied for $300 per night, thats $1,200 for that week. say the Hotel takes 50%, you'd still have $600 income that week. So compared to a normal 1 bed apartment, you migh only get $350pw.

    However, there are risks involved, they could be high vacancies, or low room rates. so this is not the best for someones first property, as you do need to have more funds and be able to ride out the seasonal rates/occupancy levels.

    Just like anything, HIGHER THE RISK, HIGHER THE RETURN.

    If you're starting out for your first property, best save a 10 to 20% deposit and buy within your means. but do take action and buy!

    Good luck!

    Eric

    Profile photo of cs_rlewiscs_rlewis
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    @cs_rlewis
    Join Date: 2010
    Post Count: 53

    Hi Eric,

    thanks for your advice.
    The trouble is i have about 23k (and rising) in the bank and most properties these days are in excess of 250K, so not many banks are going to lend me 90-95% of the sell price.
    I really need an investing partner, my friends all have mortgages and cant afford it, and my dad already has his own properties to take care of.
    So getting a start is the most hardest thing it seems

    Profile photo of Ryan McLeanRyan McLean
    Participant
    @ryan-mclean
    Join Date: 2010
    Post Count: 547

    HI Luey,

    You can start investing with $23k, but maybe not in the CBD. A lot of people will disagree with me, but I think getting into the market in a large rural town (over 8,000 ppl) can be a good place for a lot of people to start. You can buy properties for around the $100k-$150k mark, which seems to suit your budget.

    Getting started is the hardest thing, that is why starting really small can be helpful. Rural towns can often give you a better rental return. You know how your friends have mortgages they can’t afford, well why not look for a property that pays you, instead of you paying it.

    Once you are in the game then things become easier. So this could be a good first step for you.

    Ryan McLean | On Property
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    Profile photo of cs_rlewiscs_rlewis
    Participant
    @cs_rlewis
    Join Date: 2010
    Post Count: 53

    cheers for the advice, yes i have been researching lately in rurual towns, seems like a good way to start.

    Profile photo of KateMelbKateMelb
    Member
    @katemelb
    Join Date: 2010
    Post Count: 71

    If you’re interested in a high return (average 7% p.a. compared with 4% average for normal residential) then yes, they’re very good. But if it’s capital growth you’re after, steer well clear.

    Profile photo of hewlett25hewlett25
    Member
    @hewlett25
    Join Date: 2009
    Post Count: 15

    try nras homes in tassie

    they oiffer 7-8% rental returns,  

    capital growth was highest in past decade of all cities in australia

    i bought 2 units $470k so cheap entry

    Profile photo of thecrestthecrest
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    @thecrest
    Join Date: 2004
    Post Count: 992

    Watch the hotel managed accommodation carefully.
    If you think about it logically, why would the hotel give you a big share of the profits ? Coz if they were doing so well, they'd get finance from the bank for say 8%, so if that's all the financing costs, then why would they give you heaps more than the bank for you to finance it instead ?
    Cheers
    thecrest

    thecrest | Tony Neale - Statewide Motel Brokers
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