All Topics / Help Needed! / Serviced Apartment invesments

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  • Profile photo of manadeepmanadeep
    Participant
    @manadeep
    Join Date: 2014
    Post Count: 12

    Hi, 

    I am a Sydney resident and have come across multiple serviced apartment investment opportunities. 

    They are usually a studio with a bath and without a car park. 

    Most offer a long term lease (5 – 10 years) with options of extending and a purchase price that is on the lower side. 

    e.g. Here is an example 

    Price $285,000

    Guaranteed rental yield 6 to 7%

    Most outgoings paid by the serviced apartment company 

    I just want to check if there are people out there who have actively taken advantage of these opportunities. Is there a catch with these properties? Are they hard to sell if you wanted to?

    Profile photo of RedwoodRedwood
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    @redwood
    Join Date: 2013
    Post Count: 340

    Catch is limited capital growth if any, I would never invest in one.

    Cheers, Ivan

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    Profile photo of Mick CMick C
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    @shape
    Join Date: 2010
    Post Count: 1,099
    manadeep wrote:
    Hi, 

    I am a Sydney resident and have come across multiple serviced apartment investment opportunities. 

    They are usually a studio with a bath and without a car park. 

    Most offer a long term lease (5 – 10 years) with options of extending and a purchase price that is on the lower side. 

    e.g. Here is an example 

    Price $285,000

    Guaranteed rental yield 6 to 7%

    Most outgoings paid by the serviced apartment company 

    I just want to check if there are people out there who have actively taken advantage of these opportunities. Is there a catch with these properties? Are they hard to sell if you wanted to?

    Hard to sell + lack of Capital growth if any as mentioned.

    I saw one for Quest in Haymarket sydney, was advertised for under $520,000 now it's under $450,000 and still haven't sold 1 year later lol

    Mick C | Shape Home Loans
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    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404

    Google "serviced apartments" and you'll find LOTS of info. Or "serviced apartments Sydney".

    We looked at one in 2008 and bought a VERY SMALL 1 bedroom unit in Potts Point instead. The serviced apartments have gone up very little in 5 1/2 years. Our unit has gone up at least 50%.

    Profile photo of BennyteeBennytee
    Participant
    @ten_burner
    Join Date: 2006
    Post Count: 243

    Management fees are usually quite high.

    There is a limited market for them as they are investor driven.

    Hard to off load in a good market let alone in a bad one.

    Lower LVRs = bigger deposit 

    I would call them junk investments.. I think there are better places to put money.

    Profile photo of paddytaskunaspaddytaskunas
    Participant
    @paddytaskunas
    Join Date: 2011
    Post Count: 3

    usually huge Body Corporate fees 

    Profile photo of opinderopinder
    Participant
    @opinder
    Join Date: 2012
    Post Count: 61

    Stay Away If you Can..

    Not A good Investment

    Profile photo of Nigel KibelNigel Kibel
    Participant
    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    I agree with everyone else they are a terrible investment

    Also in many cases they will be deemed as a commercial property so you will have to put more cash down.

    Also keep in mind that rates are at record lows however they will go up again in the next 12 months. Almost no capital growth, there are really no great reasons to buy these types of properties

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    Profile photo of wilko1wilko1
    Participant
    @wilko1
    Join Date: 2010
    Post Count: 510

    Guaranteed yield 6-7%.

    They don't mention the net yield in their figures do they. And they assume things like you pay a 20 percent deposit etc. 

    Profile photo of Nigel KibelNigel Kibel
    Participant
    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    That is certainly a big problem in Australia as most quotes are gross returns. Only net returns matter

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    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    As everyone else has warned, generally not the best investment. Restricted LVR's, more difficult to sell, limited capital growth, high body corp fees.

    Because of those factors, that's generally why they are cheaper than normal apartment alternatives.

    Corey Batt | Precision Funding
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    Investment Focused Finance Strategist - servicing Australia-wide

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