Forums / Property Investing / Help Needed! / STUDENT ACCOMODATION , GOOD CASH FLOW SO WHY NOT ??????

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  • Profile photo of Ash88Ash88
    Participant
    @ash88
    Join Date: 2011
    Post Count: 16

    HI everyone …  being new to property investing and being told by lot of people to read steve mcknights books and find positive cash flow properties.. the only porperties i can find in Melbourne are Student Accmodation which are cheap with good cash flow and rental gurantee , However my concern is that I`m reading a lot of posts stating that they are not good for investment as capital growth is almost nothing .

    Could someone please tell me why I shouldn`t invest in STudent accomodation as even if I invest in a +ve cash flow property in rural/regional area the cappital growth would still be almost nothing .

    With student accomodation It`s closer to  the city hence wouldn`t need to travel far which is not the case for regional property

    I do understand the body corp fees would be a bit high and so will be the management fees but then again at least they will have a secure rental return , for regional properties it would be a headache to find tenants find a good property manager etc

    I also understand the banks would not be lending me money for an apartment less than 50 sqm, but the apartments i`m looking at are 70 sqm and cost about 170k.

    Could you guys please tell me if i`m missing something that I really need to look for in the student accomodation  which makes the investor class them as not a good investement?

    Your views on this would be appreciated…

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Hi Ash 88,

    It sounds goods in terms of number but the negatives out way the positives.
    1) Most student accommodation units are used by overseas students.  Every year the amount of over seas students are decreasing in numbers.

    2) Also what if the Tafe / Uni – decide to  move into a different area what will your place be worth then?
     – There are times where Tafe/Uni might relocate to other areas.

    3) Plus the reason why they do not grow in value is because its cheaper for some one to rent these units rather then buy and take a loan for it.

    My advice stay clear and run from these types of investments

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of DAMPropertyDAMProperty
    Participant
    @damproperty
    Join Date: 2011
    Post Count: 44

    Other things to consider are:
    Landlord Insurance may be a problem.
    Is the property rented all year or only whilst the students are here? 
    If it's in a body corporate situation are the rents pooled so that the total is split between the owners or do you receive your own rent?

    DAMProperty | DAM Accounting Services
    https://www.damaccountingservices.com.au

    Profile photo of xdrewxdrew
    Participant
    @xdrew
    Join Date: 2010
    Post Count: 479

    There are lots of writeups as to why student apartments are a bad invest. The real reasons are pretty simple.

    Banks wont treat them with respect.

    Since banks wont borrow on them (easily) or lend against them (easily), you've got an investment that is hard to sell ..  and you will be hard placed to find a buyer for it. Hard to sell, Hard to borrow against? Since when is that a good investment?

    Tenancies are intermittant and irregular

    You have a singular group of people you can rent these properties out to. I mean .. if you were told by the body corporate you were only allowed to rent to bikers or nuns .. wouldnt you be looking elsewhere for your investment property? And yet when its students, who are only involved with a course for a year or two at maximum .. thats ok???

    For the same specific reason .. aged or elderly care places (55+) fall into this basket.

    Management fees and re-letting fees cancel out the difference in profit.

    Most of these places have a management or body corporate that takes care of the place. It can range from as low as a couple of hundred dollars to a thousand or two … depending on facilities. This eats into the margin you have for making a profit.

    Combine that with intermittent tenancies with a letting fee for every time new tenants are installed .. the margin you have over and above a standard property for making money is curtailed significantly.

    Fashion and Trend.

    To keep reselling these places to the market .. the developers keep adding more gadgets and gizmos into these places to add perceived value. Once your place has been rented for a couple of years .. there are new and more fashionable and trendy and competitive premises competing for your student dollar.

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    These are the reasons that most people find as problems for treating these places as investments. Like most properties .. the problems CAN be solved. But the times when they are .. are rare with these.

    Treat with caution and investigate wisely.

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