Hi guys,
I am thinking of buying my first IP and just wondering why student accomodation is not considered as good IP? The price is quite low for first IP buyers. Any thoughts are welcome.
Thank you beforehand.
property_avid | NA
Hard to resell
This results in the banks not being too keen to lend money for the property – check with lenders first before committing-
Students are also not attending university for the whole year and have a long end of term vacationIf your strategy is to buy and hold, you should not be too concerned about reselling it down the track, should you?
property_avid | NA
You still want your investment to be worth what you pay for it.
Most student apartments (new) are not worth what you pay for them.Refer comments in post titled student accomodation the finance section; re buying them off unwise investors 2-3 years later – for less that the first investors initially purchase price…
The only people that really make money out of them ar the property investment sales people…
The other post was 5th July. I can’t paste a link from my iPhone
One of my colleagues has Student accommodation in Melbourne.
He paid 138k for it 2-3 years ago.
Today he can pick-up the same sized unit in the same building for $130K – 135K
It got cashflow positive fairly quick though, and he has no intention of selling it as yet, but its certainly not growing in value real quick.Hi PC_Melbourne,
Which apartment did your friend own? You can message me personally if you hesitate to mention it in the forum.
property_avid | NA
Thank you Banker, I'll have a look at the post.
property_avid | NA
Dunno the formal name for it. Heres the link –
Its the Grey Building with a Red Line Design through it on Gordon St in Footscray Melbourne..
By my count, there are 5 apartments listed for the same building ranging from $129K – 135Kthe_kurniawans wrote:Hi PC_Melbourne,Which apartment did your friend own? You can message me personally if you hesitate to mention it in the forum.
Yeah, I found it. Called Unisity in Footscray Melbourne. i think it sits near a campus for Vic Uni.
I also looked at getting one of these, but when I saw how many were being advertised it scared me off.Only 5 listings these days. When i checked a few months ago there were 9.
Thank you PC_Melbourne. So your friend received no capital gain at all, even though I'm sure the rent should go up. Well, at least he's got neutral geared property, or a CF+ property?
property_avid | NA
PC_Melbourne wrote:One of my colleagues has Student accommodation in Melbourne.
He paid 138k for it 2-3 years ago.
Today he can pick-up the same sized unit in the same building for $130K – 135K
It got cashflow positive fairly quick though, and he has no intention of selling it as yet, but its certainly not growing in value real quick.He’s a lucky one. Plenty of people dont recover their money at all…. With stamps and other costs – being cashflow positive is not a reason to ingore the other risks and poor your money in. You still need to buy quality property. If you do buy one – get one 3-5 years old and offer 50k under market value. Once the first few years depreciation benefits are gone you can buy one well under asking price…
Just don’t be the dumb ass buying from a developer or investment seminar…
the_kurniawans wrote:Thank you PC_Melbourne. So your friend received no capital gain at all, even though I'm sure the rent should go up. Well, at least he's got neutral geared property, or a CF+ property?Well I was really referring to the base price. With Stamps it would obviously be a tad more money.
I understand it rents for $200 PW
The Strata fees work out to be 4-5k per annumYes it would most likely be cash flow positive, but the pittance of rent received for these 1 room studios doesn’t really compare to growth $$ and strategic value of non student accommodation.
For us we opted for a 1 bedroom unit in roughly the same area. We bought for $142500 (It was aweful) renovated it with $15K, its recently been valued at $190K now, and secures other property interests for us, so that strategy worked out great.
Those were our choices at the time, and Student accommodation didn’t stack up in the long term, and not having the peace of mind to sell quickly without dropping prices severely if I got into trouble was the main factor for that decision.
So, the bottom line is: stay away from student accomodation?
property_avid | NA
Sorry for this question as it may sound silly, but what is student accommodation? Are they apartments which are around unis? And why would it be harder to re-sell down the track, or why would it not appreciate well over time?
thanks.
Hi, I own 5 student accommodation units, all in NZ.
If I were given a choice to go back 7-8 years & with the info I have now, I would not choose to invest in student accommodation.
My investments aren't bad, as such. The NZ managers are very good.
I calculated my position yesterday & it looks like this: I'd put in around 175 thousand. I have equity of 300 thousand without any re valuation. 2 of them have gone up about 25%
They're far better for cashflow than for resale. The reason is they're so cheap that transaction costs eat away a big % of the profit.
The cash on cash return is around 18% p.a. so far. Net yield around 9.4%
I'm considering student accommodation in Australia because I need some depreciation to offset some cap gains.
If you do buy student accommodation, you need to be aware that the starting yield needs to be near 10% as the other costs can be very high. Insurance, strata fees, mgt fees, cleaning, maintenance etc etc
The manager can make or break your investment.
KY
kum yin lau wrote:Hi, I own 5 student accommodation units, all in NZ.If I were given a choice to go back 7-8 years & with the info I have now, I would not choose to invest in student accommodation.
My investments aren't bad, as such. The NZ managers are very good.
I calculated my position yesterday & it looks like this: I'd put in around 175 thousand. I have equity of 300 thousand without any re valuation. 2 of them have gone up about 25%
They're far better for cashflow than for resale. The reason is they're so cheap that transaction costs eat away a big % of the profit.
The cash on cash return is around 18% p.a. so far. Net yield around 9.4%
I'm considering student accommodation in Australia because I need some depreciation to offset some cap gains.
If you do buy student accommodation, you need to be aware that the starting yield needs to be near 10% as the other costs can be very high. Insurance, strata fees, mgt fees, cleaning, maintenance etc etc
The manager can make or break your investment.
KY
Yer, that is one of the down falls as most owners provide furnishings, internet & other services to the tenants. This is of set by the great rental returns though.
Overall remember to get all the facts and run your numbers.
Hope this helps,
I have had good experience with student accommodation, but you need to look at the NET return. Resale and capital growth will be better if not exclusively for students. Happy to run numbers and provide comparisons
Graeme Freer | Freer Property and Finance
http://www.freerpropertyandfinance.com
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One of the main drawbacks with student accommodation is that it can limit your ability to grow a property portfolio. Even if you receive some capital growth, the few banks that are willing to lend against this type of security will usually limit the LVR in comparison to other types of property. This means you have to tie up more of your equity to purchase and hold the property which will ensure you having less equity available for investing in other projects.
There is different types of student accommodation. If you are renting a house room by room thats great. However if you are buying a 20 square meter or smaller box it is not good. Think about this what is your resale on a tiny room. Clearly only to investors hence your poor resale.
The other problem is with interest rates now over 7% your returns are not that great either.If you want cash Flow in Australia with growth you really only have mining towns in Australia. Projected growth and returns are great. The only other area is the United States. We dealing with all types of property. However personally I would never recommend student accommodation unless you were buying a house and renting it room by room.
http://www.cashflowcapital.com.auNigel Kibel | Property Know How
http://propertyknowhow.com.au
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