Ive noticed online many student accommodation apartments, with returns of up to 8%. They are cheap properties, around 90K to 120K. What are your thoughts on this, are they good investments? do they grow in capital?
There’s a reason why they’re cheap. Low if any capital growth (hence why they are cheap, they’ve been cheap forever and a day). Lenders also restrict their lending with them, which is always a poor sign as it limits the buyer pool, reducing competition for the values to rise.
They’re generally a joke amongst most serious investors as one of the biggest dud investments.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
I don’t get why they are a joke though, can you explain further. If you can buy one outright with no loan and have it net 6.5 to 8% surely that is a decent return? Or are there other issues that I’m missing..
If you’re purely focusing on yield at the expense of all else – there’s still mainstream residential properties with similar yields and capital growth potential, outer suburbs of Adelaide etc.
Else there’s other asset classes which provide the same yield and once again growth.
Consider that its gross yield, by the time you pay out strata fees, management and all other general costs, you’ll be lucky to pocket much over 4-5%.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Hi Brett,
The very nature of “student accommodation” means that for 2 or 3 months of the year, you might not have a tenant. Or, you might be able to use airbnb or similar to “plug the gaps”. But then, that does substantially increase the risk factor surely, and would have some kind of negative effect on the Nett Yield.When looking at 8% in your first post – was that nett or gross? As Corey has mentioned, apartments mostly have a larger delta between Gross and Nett, simply because of Body Corp fees that don’t exist with private homes.
Benny
You must be logged in to reply to this topic. If you don't have an account, you can register here.
