Hi,
i wona buy an investment property,… iv been thinking it for a while and found a nice city 1 bed unit for $270-300k, with decent rent of 350-400 a week. i make around 100k pa and wona make sure i get the most tax possible breaks so i wona neg gear it,.. anyone got any tips or tricks? ill be borrowing as much as possible to maximise the tax i get back..
cheers
Hopefully not one from the commonwealth bank I hope.
LOL.
I think in this kind of scenario I would speak to an accountant. Any type of "financial advisor" at this level is really a sales person for banking or investment products.
BINGO! you are 100% right, with just enough knowledge to be dangerous.
Bad advice, if they are so financialy savy why are they still working?
My wife used to be a financial adviser at a bank. She never gave me advice. When I asked why she doesn't give financial advice. She said you need money to make money, and you don't have money.
Thats terrible advice.
Yes, pay some 25-45 year old in a cheap suit, with an online degree that works in the CBD. Because they have found a matching job title, they know everything about investment. Some of the good ones even read the financial columns in the newspaper whilst they are catching the train to work each morning.
wona
Ask this question in somersoft.com. That forum specialises in IP advise
man, im friends with a financial adviser, he knows less than me…
for instance didnt know about the CG concession on rental property if you move in 12 months prior to selling……
surley some of you have some tips or tricks.
cheers
Surely regarding CG concession, you should speak to an accountant not a financial adviser. :)
id expect both to know,.. given it impacting on your investment.
in that case speak to a GOOD financial adviser ;)
If they are so good why aren't they on their yacht floating through the Med?
Not sure where you live but the concession in NSW doesn't work that way, if you rented it out for any period you need to declare that and the percentage of the profit you made since then is taxed based on the ratio of how long you actually rented it:how long you lived there. If you do otherwise you are tax dodging
Not sure where you live but the concession in NSW doesn't work that way
When did states take over the taxation of cap gains?
You are right, it's an federal tax so it wouldn't matter, I think I was trying too hard to be nice while disagreeing
[@T1OOO](/comment/2537551/r sorry not sure edir): sorry not sure of the context of your statement
CG concession on rental property if you move in 12 months prior to selling
I don't know this either. Can you elaborate?
these guys are just insurance salesmen
prior to selling? should be prior to renting? you get 6 years of GC exemption.
concession as long as you owned more than 1 year. Capital gain tax at 50% if u r resident of the country (changes around 2012 2013).
Firstly, great idea! Investment properties done properly can work wonders and I'm just starting into the property market myself (21yo and looking into my 2nd house/1st investment property at the moment)
I've read in a lot of different places to try and avoid inner city apartments as theres so much available that that the competition can make it hard to rent. The yield is decent but to be honest I'm sure you'd be able to find something way better than that with a bit of searching.
Good luck buddy.
i know the city apartment market well (As ive lived here) and they have high almost positive geared, these do have high strata costs also though,… i spose nothing wrong with positive geared after all, since you are actually getting an apartment paid of by someone , right.. worst case.
im also looking into houses, as they dont have the strata fees, and get decent rent, and dont cost all that much with better capital gains due to land. so im not too fussed about which might try both.
Are you two talking about same City? I am asking as one of you is from Brisbane and other from Adelaide?
in talking sa, cbd.
after strata, water and council, how much negative (roughly) we are talking per week? sound interesting… Adelaide cbd
sums are there, out goings are 5.5k depends how cheap you can get the pro for and how much you borrow but from my sums worst case its almost pos geared from day 1, of course u gota pay agent costs ect… there isnt really a shortage of property on the market, but good ones dont last long, we have had a decline on uni students from over seas so its not as hot as beffore.
interesting i assume you are borrowing at 80% but still can come up with +.
in sydney that is not possible for apartments.
oh and get one bed not studio.
also smaller units might difficult to get a lender.
id be borrowing 100% thats what the figures are based on,… but im not too keen on this as any gains i lose on mortgage insurance,… if i only borrow 80% its well and truly positively geared, so id hope to borrow from 2 diff places 80% one and the other from another to maximis my expense. I can get this from a relative if i really need to or use my own savings coz im not sure you can lend to ur self?
this is a 1 bed, interestingly another one i was looking at (Same complex) 2, bedroom very nice sold for $360k and gets $500 rent.. higher strata fees of almost double thought, 600 per qt vs 1000 or so.
You do actually need to use your own savings. You aren't lending it to yourself- it's your money to invest as you see fit. Some banks may do 90%, but you'll still cop LMI.
You won't get a 100% lend for an investment property. If a bank finds you've borrowed the 20% to avoid LMI (i.e. not genuine savings), they won't fund it.
Talk to a FP and an accountant. The most expensive advice you can get is free advice. Ozbargain is not a great place to ask for this info - you'll get 100 different opinions, a couple of correct answers and no idea which fits your circumstances.
If you get this right, you'll make buying other investments in the future easier. Get it wrong and it may be your first and last investment property if the numbers don't stack up.
Good on you for getting out there and doing it though mate
Pre 2008, this may have been a possibility. Not anymore.
Plus consider how much interest you are going to Pay, 300K @ 5% is 15,000
Worst Case Scenario:
Income = $350 x 52 = $18,200
Interest = $300K x 5%pa = $15,000 (Not including Fees)
Rates/Body-Corp/Agent Fees/Maintenance = ~$2000+ (Guess)
You walk away with $1-2k per year.
And you carry the risk if interest rates do go up (Most likely, the won't).
Doesn't seem very attractive?
in the first year, no it dosnt, but the further you get into it you pay down the principle and interest you paying goes down…
You shouldn't ever pay principal on an investment property. Interest Only + Offset is much better for many reasons.
Other possible costs:
$20 per week for an agent to manage it
$600 one off cost to the agent
Average of 2-4 weeks lost rent per year
(Apartments may attract more short termers)
This will take up to $2800 off your cash flow first year
as long as the apartment is under 40 years old or so there will be an element of depreciation.Depreciation is the good kind of negative gearing as it doesn't hurt cash flow but reduces your tax.
I reckon first year your situation would be:
-$1500 out on cash flow
-$3500 against tax rate of 40%
=$1400 cash back at tax time
Therefore cash flow wise you would end up breaking even. It would all come back to the property going up in value.
Safe bet cash flow wise in short term (until rate rises). Remember that land appreciates in value (typically) and buildings depreciate. You are limited in how much you can borrow so invest wisely.
Make sure the property has the best chance of appreciating in value.
Also how much will it cost you to aquire the property, stamp duty, mortgage insurance?. If it costs you 20k to aquire then the property may take 3-4 years just to recoup this.
Hang on. The main bank that the deed is against pays upto 97% to avoid insurance 80% keeps them happy any other arrangment i have is upto me. I mean if i default thats what mortgage insurance is for and they still own the house thats worth 20% more than what they lent out. The other creditor is unsecured. For tax ill declare both loans to 100% but either/both bank wont have to know anymorr than their own busineed thus maximising my intetest to of set incomr but avoiding the insurance. I could even claim thr stamp duty.
I wasnt expecting all that serioud answers more so ideas to go on. Thr sums on paper and tax savings look decent. But would still like to hear tips and tricks from others
Im not planing on selling. But if i do i know there are ways to avoid capital gains unless you hit the jack pot and thatd what im aimong for. Whrn i last looked at it there were lots of deductions and deprrciation to be had and cgt could be minimised even rliminated.
Cheers
1 thing ill add. Air fares and hotel stays are deductable if related to a property. So id fox for the property chanel. ;)
Which bank would lend you the 20% unsecured?
Also the interest rate on this 20% would be that of a personal loan ~10%.
its not very hard to get money these days cheap,.. i meal all the banks are giveing 1.5-2 years at 0% on cards,.. cash is cheap (short term at least) enough time for it not to really matter.
Seriously gather information here but at least go get an accountant or financial advisers advice. Even sommersoft is more advisable. They may not be right but they focus on one thing so chances are they're more likely to be closer.
I am concerned that you'd even have the proper advice and education in this. To be honest you're spelling alone makes me wonder how educated got are for this. Yes its argua bly unrelated but I'm a firm believer in relativity. All things aside.
Firstly are you aware that moving into a house 12 months prior selling does not exempt you on cgt in entirety? It does for the proportion of time you lived there. But at least your one up on your friend if he hasn't even heard of it and he's a financial planner (worrying. Tell him to brush up, seriously).
Second you can't just claim stamp duty as a deduction. As a cost of purchasing your property perhaps yes.
Whether you can borrow to fund your 20% deposit and it can legally avoid Lmi i dont know. But common sense says where are you going to get an unsecured Loan for that amount. You either are securing it with something which is essentially you paying your own cash of 20%. Or you're paying a crap load of interest on it. In which case it would be just as financially silly.
Id also be interested how you calculated rough back of the envelope figures this will be positively geared. At a 1% guide of purchaser price as to weekly rent your already budgeting a weekly rental higher than this. Post your envelope figures and we'll see.
I'm also confused from your responses above? So ultimately your not going for huge capital gains?more so positive gearing? As long as your not anticipatingb negative gearings as a driving reason. If so please stop now. The notion of investing for negative gearing had to be the most stupid thing you hear mum and dads spruiking the property investor dream.
Keep in mind you can't just deduct airfares and hotel stay outright for visiting your property. Unless you plan to just travel there to upkeep it and fly back. If you plan to lump your business, holiday And personal private adventures while there you are in for a legal shock because you sure ain't getting a deduction for all of that.
and its not that im not going for huge capital gains, with appartments i dont think there are massive capital gains its the income they provide more in rents,…
If you are earning 100k a year please just go and speak to an accountant as you sound like you have absolutely no clue what you are doing.
As SaberX mentioned there are many factors to consider and Ozbargain simply isnt the forum to be getting these ideas from.
Honestly, buying a rental property can be a great idea, especially if you do it right and get a proper depreciation report (see BMT) but there is a huge amount of tax law involved in this area that you need professional advice for answers.
perhaps you can help out? im all ears,….
what are some important questions areas i should be looking into that i have "absolutely no clue what you are doing" in ?
cheers
My point is you are asking in the wrong forum, and good professional advice usually isnt free.
A few areas im thinking:
CGT consequences of buying a rental property - this is a bloody whirlpool of tax legislation which I have a huge amount of experience in and understand that most people on Ozbargain wont understand correctly, or be up to date with as its constantly changing.
Genuine deductions relating to such an investment - Depreciation reports etc that many people dont understand.
Property locations and potential problems & hidden costs
Other possible investments that may be more suited to you as there are many out there. (remember there is a large chance there will be housing crash in the next few years.)
A good accountant will only charge you about 500 bucks a year if you have a rental property and they will hold your hand through the details. I cant recommend that enough.
Well you typed wona 3 times in your opening reply so I could only assume certain things… as I said, I shouldn't judge on these things as they are a rough rule of thumb, not an absolute. As I said, it's more important you have an answer to my questions below, if not you need to do more research for your own sake, not in answering mine.
Also, if this decision is important and needs to be done quick turn off the tv and socceroos and tackle your 270k problem first.
why not? im paying 30k tax, why not get some of it back if its via neg gearing with investment property all the better.
the bit about capital gains, was just enough not to have to pay CGT if i sell,.. its about 7% a year where you can get away with deductions as with inflation it cancels it out,.. that when i was doing my models last year. for instance buy 300k sell for 450k after 7 years, i think it ended up meaning i woudlnt have to pay ANY CGT. there were 2 formula to use to calculate and both meant no or very little CGT.
later if it is positively geared great! i can take on another neg geared prop too…
wahts the issue?
The issue? Seems to be that you want a property that won't cause you to have CGT and will grow in line with deductions to roughly even out. YOu should be glad you're paying CGT becuase it means you're making a profit. That's like saying I hope I don't own over $100k for my salary as my $60k salary will cancel out with my deductions… do you see where the problem is?
Negative gearing - and the whole point of it which majority of mums and dads fail to see, is there to use leverage to get you into more properties with the eventual idea behind it is that you will be able to buy properties you previously wouldn't afford without leverage that grow faster than your negative gearing in terms of capital price over the long run. It's as simple as that. Wanting to negative gear and buy properties with nil CGT growth just doesn't make sense to me.
The vast majority of people state the negative gearing is good to minimise tax being paid, which is obviously not the reason it builds wealth. It only builds wealth when eventualyl the income and capital gains combined give you a great inflow than your outflow than had you not negatively geared and never bought the property….
If you wanted to earn income without paying tax you could just likewise buy franked dividend paying shares/businesses.
300k to 450k in 7 years is roughly an implied annual growth rate of 6% pa… year on year… do you really think the economy and heated market can continue to rise that much in this location? It sounds like an outlier suburb for the price you paid? That's a question you'll have to answer yourself.
Assuming a bare minimum interest rate of 4.5%, plus inflation of 2%, thats 6.5% in rough costs to add onto your 6% growth. So you now need to make about 12.5% return year on year from rent and/or capital gains appreciation of your property.
Do'able in the boom times, but unless you have something more sophisticated in calculations, where are you plucking these numbers from? From solid market research about what you can rent this for? How about growth wise, where have you pulled 450k from? If you can't answer any of those then you need to go back and run the figures and give it some thought.
270k at 5% for 10 years is what i was using, growth of 5.5%.
my capital gains would be :
Capital Gains Tax (CGT) Calculator
RESULTS:
For a detailed explanation click here
Sale price $450,000
less Cost of selling $16,000
Adjusted sale price $434,000
Purchase price $270,000
add Cost of purchase and ownership $94,500
Adjusted purchase price of asset $364,500
Capital gain/loss $69,500
RESULTS:
CGT Old Regime CGT New Regime
Indexed capital gain/loss $69,500
Tax payable under old regime (marginal tax rate x indexation factor x capital gain) $33,708 Tax payable under new regime (marginal tax rate x half capital gain) $16,854
however, this didnt take into account my income , the other calculator did and said i had to pay $40,000 or so, but didnt factor in all the deductions.
things asked where:
Date asset purchased (dd/mm/yyyy) //
Date asset sold (dd/mm/yyyy) //
Sale price $
Current taxable income $
Capital cost of purchase and ownership
Purchase price of asset $
Stamp duty $
Fees for tax advice $
Capital improvements $
Other $
Non-capital cost of purchase and ownership
Land taxes $
Repairs $
Rates $
Insurance premiums $
Other $
Cost of selling
Newspaper advertising $
Online advertising $
Sign board advertising $
Agent's property guide advertising $
Photography $
Agent's commission $
Auction fee $
Legal expenses $
Other $
Just thought I throw in my 2 cents here.
I and my partner have purchased 3 properties, one to live in and two as investment. We did quite a lof research. Also heard some horror stories.
5.5% growth seems reasonable growth in terms of capital gain, but whether you achieve that or not depends on various factors impact on property prices (Desirability, affordability etc).
In my view, apartment purchase usually does not offer good price growth, just due to the fact that the supply is much greater, and when times come to selling, you are competing with other units in the same complex. Also, there are no unique factor in apartment units as they are dime a dozen, the buyer does not get emotional therefore it is hard to get good growth out of them (EG like those emotional auction often times where multiple buyers are thinking, we must buy it because it has a nice pool/yard whatever).
I would consider buying something that has land, or at least a townhouse/terrace if you must be close to the CBD. PS - Non of my props is in SA.
hi, there are a few properties on the market in the complex that wont sell,.. i think they are backed by the same agent, and are asking WAY WAY too much, ie $400k vs $300k….
i see this as a "safer" option than a house to dip my toe in the water, in a place i seam to know well. I think the price is good,.. rent decent, and there is some development which could make these very hot prospects in the next 1-2 years.
@T1OOO:
If that is the case then I think you should go for it.
We can talk about the cost benefit etc, all day long, but we don't have crystal ball to see in the future. I think most importantly you are comfortable psychologically to enter this investment with your eyes open to the risk then you should do it. Better than not doing anything. If nothing else, it will give you some experience in investing in properties.
yeah, btw, the prices have droped by about 20k in the last 6 months due to FHOG being sucked out of the market,.. and its a very very soft market atm,.. having lived there i know these places are undervalued, and in a prime location close to uni and everything else.
cheers!
natch! i know a deal when i see one, i bought a second hand iphone 5s 32gb yesterday for $180 only had a small chip on the back of the glass,.. unlocked, lightning cable and un used headphones!
pretty good ;-)
How did you calculate your cost of purchase and ownership?
You have not adjusted your calculation for capital works depreciation that you have claimed over the 10 years.
The amount of capital works depreciation claimed over the life of the investment property reduces your cost base. This willl increase the amount of capital gains you obtain from selling the IP.
@T1OOO: Capital Works Depreciation is the 2.5% of the building value that is claimed over 40 years. The building value is generally higher than the land value in most apartments.
In the case of a 300K apartment, the land value is about 50K and the building value may be 150-200K. Over 10 years, capital works depreciation would be 25% of this (i.e. 37.5K to 50K). If you claimed this yearly for your tax deduction, this amount must be deduced from your cost base (no double dipping) and thus your capital gains would be higher and you will get taxed higher when you sell.
@ano0321:
I thought something similar when I bought our first small townhouse/unit. We put a lot of work into improving it too then had to sell after 3 years for something bigger.
We broke even after 3 years so it was not a good investment on paper but not a costly one either. we focused on loading up the offset and enjoyed seeing our monthly payments reduce every month.
we had the option of either buying 2 investment properties or buying one more expensive PPR On a decent size block. We ended up doing the later but renting out an outside bungalow. This halves interest only from 2k per month to $1.1k per month.
We feel this property will give us great growth. But we don't have the issues of being a landlord on far away properties. No CGT As PPR.
There is more than one way to do things…
Mate, you really need to speak to an accountant (CA or CPA);
1) You can't claim a deduction for an expense against your income and ALSO add that expense to the capital base. i.e. a portion of your $94.5k ownership costs.
2) You don't have a choice of capital gains calcs (i.e. your old or new calcs). You must use the new method if the property was purchased after a certain date (from memory it was about 1999).
Missing details like this could be costly in either missed deductions or in fines for breaking the law if you get audited. Speak to a good accountant.
275k property price rent guaranteed of $400 week on 2 year periodic to the hotel leased back. say 250k at 5% for 30 years would be covered by the rent. i think it was $1450 mortgage rent 1800 or so.. but not factoring in strata and council.
cheers
Look, I don't know what the rates are wherever you are but you sure wouldn't get 400 a week on an apartment here in WA. $400-500 is a 1 bedroom, 440k+ apartment here… if say you're over east maybe someone is better placed on that then me.
Strata, council? Strata is a pretty big cost for apartments than house and land IMO. Repairs and maintenance? You'd be taking a big bet imagining that mortgage rates are going to stay at 5% for the next 30 years. If it did you will probably have far worse things to worry about as far as this country/economy goes.
These calcs I will outright say I can't judge as I have no idea where you are and the market, but they don't seem too conclusive or detailed as I would hope someone taking this big of a decision would be…. I'm sure there are alot more hidden costs that you haven't budgeted back in.
Agree with the above points, particular interest rates: always factor in at least several percentage point increases as if you are making a long term financial decision, it should never be made based on the current short term interest rate.
Right now the central banks are running scared (unjustifiably I might add) from a little deflation, and their response is drammatically increasing the money supply. Time and again history tells us that inflation can rapidly turn into runaway inflation due to this massive supply of new funds needing somewhere to travel. Having said this, the RBA will most certainly be following the path of insanity and slashing rates further this year, much like Bank of Canada just did, so your calculation will look even better shortly.
the sums are right. I dont think rates will stay 5% for 30 years either.
The moment you heard the words "rent guaranteed" you should have run away. These "gaurantees" are a trap for the new players.
Some definitions:
Rent guarantee = guaranteed capital loss
Capital guarantee = guaranteed poor yield.
Only buy if it stacks up on its own merits based on your own reasearch. That sort of real estate does not need any sort of guarantee to sell quickly.
I would avoid student or hotel accommodation places, banks don't like to lend to these places or have strict rules. Ensure your unit is a true residential one, and internal area at least 50 sqm. If its Sydney, 45 sqm might be acceptible. These are most banks requirements, and because of that, would rise faster in value during boom times. Its normal residential places that go up in value and have all the demand that you keep hearing about in the news. I made this mistake 10 years ago when my suburb boom while my hotel accommodation plummeted in value, while the body coorp kept robbing me in fees.
he was saying SA, adelaide cbd. yes sound like unilodge type in sydney.
nah its serviced apartments, and private owned, in a hotel complex. varey from 60sqm to 120sqm on average. 1-2 beds
Serviced apartments…. If that is true, where are you getting the rent figures from?
Many times Agents and sellers "guarantee" the rent but over time this guarantee is worth nothing if the seller moves on and leaves a shell of a company that has no way to pay out on these guarantees
Its an old Surfer Paradise trick
Plus being serviced apartments they up the servicing fee, over time apart from the strata fees. Also you may find only they can rent out the apartment, so you are limited should you not be happy with their management.
We had a "serviced" apartment in Surfers, the "tenants" souvenired the kettle, iron, pillows towels etc and guess what we had to pay to replace them. (and they bought them from their "suppliers", no ozbargain deals there).
The Managing agents as care no responsibility clauses, this meant we had to. Then every 2-3 years they wanted to update the decor of the hotel, yep we paid. New carpets curtains etc. Oh and the old stuff wasnt returned to us, it just disappeared. And the agents were a "well known" international hotel chain.
And then there was the time we found they did hotel promotions - and the "discount" came off our return, they still got their minimum rent share.
Since my parents lived next door to the unit, they could track the times it was occupied. Yep initially the occupancy didnt match, until they realised we knew when it was occupied, so then things tallied.
All things that can affect any dream deal…
@RockyRaccoon:
This!
Serviced apartments/Hotel/Student Accommodation etc, all in the same bucket in my opinion.
Not same ball game as a normal residential property. If you try and sell them, they take forever, and you cant live in them.
A real estate once called them a "cancer"
BUT, unless you know someone who knows about this game, they may beg to differ….
I chose the wrong word in "serviced" when replying. While, there are some serviced apartments about 15 out of around 150-175 or so, 75-100 would be hotel suits, and the rest would be owner occupier or leased out. The serviced apartments are run by private owners as a sub business, the hotel does “Service” all the hotel rooms as you would expect.
When up for rent they don’t last long on the market, i used to live there, both in a serviced apartment and also in a yearly lease rented out. I would also like to live in them as an owner occupier in future, they tick all the boxes that im looking for when choosing property.
Some when sold, still have the lease back agreement with the hotel, 2 years at a time. The return they pay out is a little better than renting them out yourself, so I know what the value of them is. Say 2000 monthly return after fees leased back to hotel, vs 400x4.33 when you do it yourself $1732
Its def not uni lodging, where you all share 1 bathroom at the end of the corridor and laundry facilities are in the basement, each has its own facilities. Washer/dryer, shower and some with bath/spa, balcony, kitchen, and living room.
Cheers
Thanks for the clarification. The situation you are mentioning is exactly the same as we had (different from ssa02.
As you will note my parents lived next door, in private accommodation (it was one unit, which could be either a 2 bedroom or 1 bedroom and one studio) so we leased out the studio to the hotel.
Well known building in Surfers, Sun City.
So while the conditions of lease maybe different, you had asked for advice. If you take what is given and investigate the deal you are getting, you may find similar clauses etc, so if they are, then you can factor in these with your decision.
They maybe completely irrelevant, but without being aware of potential issues you might get caught.
Good luck and maybe when you make your first million, you will shout a coffee should I visit Adelaide.
will consider all that,.. I think that would be pertain to leasing it back to the hotel, carpets cleaned/replaced, ect.. and yes prob done by their "exclusive" provider at higher rates that they skim of the top….
from what I know in surfers, well there’s stacks of apartments, over supply, and there are peak times, its a tourist place more than anything. so rents ect.. vary dramatically. summer it’s great, winter I would imagine not so good.
first million? im sure you meant "next million" ;-)
Cheers
Yes I know was he was talking about Adelaide, I used Sydney as an example because it's where i live.
And Unilodge is exactly what i was thinking as well! Best example!
Hey cashed up bogan,
learn how to spell and use grammar correctly before your start investing with the big boys.
You should see the grammar of some real estate agents!
Wow, I was expecting to get negged to buggery for that insulting comment.
This is the highlight of my 2015 so far.
Yes, I'm a Hater 4 Life and hate everything equally with a passion.
Probably because we took it as a joke not directed at us!
Because to be honest, a lot of investors can't speak English let alone have good grammar! :)
I have some rich friends who can hardly write English, but speak other languages. No correlation w' richness and speaking good ;)
What sort of job do you have where you earn 100k and write like that?
how on earth do you think you'll be getting a $400 a week return on a $275,000 CBD dog box?
i'm paying $420 a week rent at the moment for a 3.5 bedroom house with a massive yard and lock up garage in Medindie gardens. the Adelaide rental market isn't nearly as strong as you seem to think it is. this is where your plan is going to fall over.
i used to live in said dog box and was paying $370 2 years ago,.. and i was LUCKY to get it! there were LOT of people interested and similar ones went straight away. i keep track of them weekly to know whats coming up for sale/lease.
Medindie is a pretty good area, but its a house, mines a unit, better rental return but not as much capital growth due to no land.
what i was paying for was the lifestyle,…
live in city
work in city
shopping in city
go out in city
gym in city
sports in city
the amount of time you save on travel and the lifestyle you have is alot better than having an extra room.
There are 'serviced apartments' going for less than $200k on St Kilda Road one of the most expensive and sought after areas in Melbourne. An equivalent apartment just next door in a proper apartment building will go for $400+.
There's a reason these serviced apartments are so cheap, no one wants to touch them. They are viewed more as a liability than an investment.
Here's some examples.
http://www.realestate.com.au/property-apartment-vic-melbourn…
http://www.realestate.com.au/property-apartment-vic-melbourn…
http://www.realestate.com.au/property-apartment-vic-melbourn…
http://www.realestate.com.au/property-serviced%20apartment-v…
I would have thought in the Adelaide CBD that you could get a real apartment with a good view in a nice building for $300k.
same with unilodge sydney when you browse domain.com.au sometimes you will find 20-ish shoe boxes for sale… from one building..
I would have thought that $300k would get a real apartment with a nice view in a good building in the Adelaide CBD.
I wouldn't consider a short stay building for an investment without a long term bank guarantee from the business owner, or unless I already had a large portfolio.
forget i ever mentioned the word "serviced", just apartments.
"I would have thought in the Adelaide CBD that you could get a real apartment with a good view in a nice building for $300k"
thats what i am talking about, and the view is very nice , one of the best things,.. some face another building , not so good, ill only b going after the ones on high level with good views.
"nah its serviced apartments, and private owned, in a hotel complex. varey from 60sqm to 120sqm on average. 1-2 beds"
-T1OOO
i already explained….
"I chose the wrong word in "serviced" when replying. While, there are some serviced apartments about 15 out of around 150-175 or so, 75-100 would be hotel suits, and the rest would be owner occupier or leased out. The serviced apartments are run by private owners as a sub business, the hotel does “Service” all the hotel rooms as you would expect."
If you are relying on the apartment having already a contract to a short stay business then it's a serviced apartment. Even if you can move in at the end of a short lease and stay there as an owner-occupier it's still what I would consider a serviced apartment.
Just out of curiosity, have you looked at other buildings? For $300k in Adelaide I would have thought you could get something that wouldn't have the short stay stigma.
not relying on it,.. alot do have one, but when you buy , you have the option to continue the lease back or move in or rent it out yourself…
service apartment means a bit different, they are mainly hotels suits (that are more akind to an apartment unit, than a hotel room with bed and wardrobe + mini bar).
when i stayed in the service appartment sub penthouse my rent was ~770 a week. included internet, elect, ect… and daily cleaning. when i rented it was only $370 but i had to pay all the utilities, ect..
so service apartments were a very small part of the hotel complex make up,.. medium stay,.. short term stay was the hotel's business, and then the other was private owner/lease.
That's exactly what a short stay/serviced apartment building is.
The business is risk mitigating by not putting their money into their own real estate. They are putting the risk and work on to you. They can't fill their rooms and are hoping that people can help them out in the meantime whilst the business picks up.
Something also sounds real fishy if you paid $770 a week for an apartment with all bills inclusive that rents out for $370 base. $400 a week for cleaning, utilities, and share of the outgoings sounds pretty damn high.
the only risk would even be if the hotel pulled out of the place, which i doubt it would do,.. they own 2 almost next to each other. In that case prices would plummet.
it was short stay,… few months,.. vs 12month lease, it was a much much nicer apartment too,.. when i did the sums it cam out a winner.
If it was the only risk then there wouldn't even be these places on the open market. They would all be snapped up instantly on a closed market by portfolio operators/syndicates.
Best maybe to have a chat to a conveyancer (a good one) who has dealt with these investment places in the past, as they will have an idea of what's really in the contracts for these kinds of places, and the problems that their clients have had.
Speak to a financial adviser. That's my tip.