Scattered throughout the Melbourne CBD are serviced apartments. These apartments are residential complexes that have a hotel like service provider rent rooms out. Companies such as Quest and Mantra are large chain companies that set up in these buildings and have long term lease agreements with the owners of each apartment. Usually These agreements would span over ten to twenty years, with an option for the tenant to opt out every five or so years.
The great thing about these properties is they really are set and forget. The rental yield on average would sit between five to eight percent, depending on which building you buy in and how well you negotiate. Though if you’re looking for capital growth, don’t expect much performance from these little gems. We’ve had clients sell their apartments after twenty years for the same amount they purchased for. But over that time, they have had amazing rental returns and great passive income.
A lot of the properties available usually come in form of studio and one-bedroom apartments. There are different arrangements from one service company to another, so look out for who is liable to change furniture over and keep the property updated. The banks aren’t favourable to lending on these types of properties, so you’ll most likely need equity backing or cash, though some lenders will look at twenty percent deposits, you will have to search around for the best deal you can get.
If you’re wanting to create a portfolio for future income and have the thought of buying and never selling, then I would try to purchase as many of these as you can. If you’ve got some cash or equity handy, you may be able to average out a guaranteed seven percent return plus have the equity in the property. The best part is they are usually very affordable with properties starting from as low as one hundred and ten thousand dollars.
The following advice is of a general nature and intended as an opinion and broad guide. For all legal, financial or real estate advice you should obtain independent professional advice to do with the specific nature of your circumstances before making any legal, financial or real estate decisions.