Tips for First Time Property investors: Molly's Real Estate Blog

Tips for First Time Property investors: Molly's Real Estate Blog

When It's Time To Invest: Pros and Cons Of A Serviced Apartments

by Vanesa Diaz

Serviced apartments are a great alternative to hotel rooms for many travelling families, and they are also very popular with corporate travellers too. More than 1.9 million Australians are investment property owners, and as someone who is on the hunt for your first investment property, you will see serviced apartments for sale during your hunt. As with any type of investment, serviced apartments have both positive and negative aspects when it comes to ownership, so these are the main points you need to know.

Positive Benefits Of Serviced Apartment Ownership

When you are looking at your first serviced apartment, it is best to consider one that is managed by an established rental management system. Some apartment blocks have a rental manager that looks after every serviced apartment in the building, and this takes a lot of the hard work out of your hands. Purchasing an apartment in this type of building means you will gain the following benefits:

  • You pay one set management fee. The management fee covers renting out the property for you and organizing repairs, maintenance, and cleaning when needed.
  • Many serviced apartments come with rental guarantees. A rental guarantee is when the manager takes out a long-term lease with you for the apartment, and they then pay you rent for this lease. Next, they rent the apartment out to travellers who like long-term accommodation that comes with full cooking facilities. Because they are already paying you rent, you have the guarantee of receiving money whether the apartment has visitors in it or not.

Of course, when you are considering any type of investment property, you need to know what the negative aspects of it are too.

Negative Aspect Of Serviced Apartment Ownership

The main negative when it comes to buying a serviced apartment is that it is not always easy to get traditional bank finance for the purchase. This is because a serviced apartment has a smaller pool of prospective buyers in the event of a resale, so the bank therefore considers it to be a higher risk property type.

There are three main ways you can dilute the negativity when it comes to purchasing a serviced apartment:

  1. Be prepared to pay a higher deposit. Rather than a 10% traditional deposit, a 30% or 40% deposit will lower the loan to value ratio, and make it more appealing in the eyes of a financier.
  2. Look outside the box for lenders who specialize in financing serviced apartments, rather than just considering the major banks.
  3. Look for a serviced apartment that has its own property title, rather than being part of one large strata title. When the property is on a standalone title, the financier has more control if it needs to sell the property to recover its money in the future.

A serviced apartment is a great long-term investment type, and now you are aware of the benefits and negatives of purchasing one. Researching further into serviced apartments with your real estate agent could set you on the path to being an investment property owner. You can also talk to local apartment complexes like Adelaide Dresscircle Apartments about their serviced apartments. 


About Me

Tips for First Time Property investors: Molly's Real Estate Blog

Hi, my name is Molly. I have been a property owner since my grandma died when I was eighteen, and I inherited a rental property. Over the years, I have managed that property very successfully, and about ten years ago, I started adding to my collection. While I would definitely say that the investment property game is not a get-rich-quick scheme, it can make lucrative money. To help others who are interested in getting into the game, I have decided to start a blog. Here, I am going to share insider tips, experiences and ideas. Get comfortable and feel free to explore!