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Invest in furnished studio.

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Humberto | 24 Nov 2013, 05:46 PM Agree 0
Hi,
I would like to know your opinion about invest in a studio apartment which is under contract with a hotel for 5 or 10 years. In this case the pre tax cash flow is positive and very good, but i do no know what is the risk in this kind of investment.

thanks in advance
Joseph
  • Mark Coburn | 25 Nov 2013, 09:23 AM Agree 0
    The first big problem: trying to resell it one day! You will be competing with the Agents that will be managing other "rooms" in the complex. Add to that there are so few buyers for these investment properties.
    Guaranteed Rents? This is factored into the purchase price...so it is overpriced at the outset.
    You want a guarantee? What do do if the management company goes broke, or as I have seen happen, they just stop paying you for 3- 6 months. What can you do? You have a commercial lease with them, So you have to take them to court to get your money. If they are not paying you, then they are not paying half the other owners as well. So you get a judgement against then, and you send them into liquidation, then what do you do now? sit and wait while a new management company is found.

    I am yet to come across anyone that is really pleased that they purchased an investment like this. I say: Why complicate things? and if the Banks don't like them, they have a good reason.
    There are better deals to be had, and we can find you one at a discount to market price. Plus we provide 1, 3, 5 year cash-flow figures so you know how much you are going to make on your investment up front.
  • Goodo | 26 Nov 2013, 01:48 PM Agree 0
    Joseph,

    Mark is right with his comment re Banks not liking them mainly because of the reason Mark outlined but also the fact that the management contract may limit the lenders ability to take possession of the property if a forced sale situation were to occur.

    Many financiers will not touch them at all.
    Those that do will need to review the management contract for the above access restrictions and if its OK will still restrict the amount they will lend you against this type of property compared to say an investment unit.

    You need to complete your research on this type of investment and be aware of all the facts before entering as there is more than usual.

    Stephen Goodwin
    Franchise Owner
    Resi Mortgage
    0405 388 467
  • Frank, | 15 Jan 2014, 06:34 AM Agree 0
    Where can I find furnished studio apartment as a investment property?
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