I'm still working out my options for my first investment property. But I wanted to ask about apartments which have a fixed tenancy rate. Is there any way you are going to lose money on these? There's a few like in this in Adelaide, but as an example for this one: http://www.realestate.com.au/property-unit-sa-adelaide-109229456
Price $260k
– rent return $2,315pm – a 9% approx gross yield
– outgoings – $886 pm
– a fixed tenancy for the next 13 years!!
– rent is increased 4% per annumAre my sums right in this:
Rent (minus) Outgoings = $1429 month or $360 week / returnThen I have a $100k deposit but not sure if I should use it all. So a couple of options in this scenario would be:
Get $220,000 loan ($40k deposit). At 6.45% current variable it equals repayments of $319/week. This would mean a return of $41/week
Get $260,000 loan ($100k deposit). At 6.45% current variable it equals repayments of $232/week. This would mean a return of $128/weekCurrently my $100k is in my UBank savings account at 6.11% which on my $100k is = $117.50/week.
Is that all about right? So after I would just need to consider the taxes for buying the property, and then consider if there will be any capital gain. But with the fixed tenancy and if I keep it for 10 years or so, surely there will be.
The problem is the tenant. Quest Apartments. You can expect you capital growth to be… zero. Search the forum for serviced apartments and you'll see plenty of discussion on the topic.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Okay I've been put off completely. Thanks!
You need to ask yourself what is your end game? What are your trying to achieve by buying an investment property?
These type of rent "guarantees" are for people who are scared and want something positive to hold on to, but JacM is right, capital growth will be awful and you will look back in a few years and be wondering what you were thinking.Also, try getting a loan for these. Much harder that normal residential. Therefore it will be harder to sell too.
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
Terryw is right, the lenders see it more like a commercial transaction and they will restrict the LVR (loan to value ratio) as they consider it higher risk, and rightly so, as they normally are.
As Terry has mentioned getting a loan past around 65% will be the hard part.
Lenders dont like Fixed Tenancies at the best of time and especially when it is over 1 year.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Can you lose?? Oh Yeah!!!
You need to factor in vacancies, management fees (high with these), rates, insurance etc. Doesn't sound so good then.
That's if you get through the hurdles Terry mentioned. Glad you decided to look elsewhere.Plus these don't seem to go up in price. I looked at some in Sydney in 2008 and they are still the same price, whereas my SMALL unit I bought in the same area has gone up 50%.
Think also of the opportunity cost.
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
Hey DMB are you in Adelaide? Im in exactly the same position as you (right down to the 100k in UBank lol) Looking for the best way
invest it in property/properties ie the right balance of debt to offset the tax I pay on my job…and the right area to invest in Adelaide for best potential capital gains (if any atm lol) would like to hear how you go….you can pm me if you like cheersMy understanding is they factor in the rent when they sell you the property as well. SO lets say for example the actual worth is $200 000, but they sell it to you as $260 000. And the $60000 is your rent paying back to yourself for the next 13 years.
As an example only.
At 60-65% LVR you be able to get this through smaller residential lenders, but one of the main issues with residential lenders is that they are very picky with the quality of the security ( size, how much control the hotel holds etc…) + will discount the amount of rent they will use in the serviceability.
Commercial lenders are more flexible, but charge a higher set up cost and rate.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Good to read advice about the Quest Apartments or serviced apartments offer..I thought it was too good to be true!!
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