Is investing in serviced apartments a good idea?

14 Jun 2012

Information provided by Quest Properties - 14/06/2012

Is investing in serviced apartments a good idea?

Investing in real estate has been a traditionally lucrative investment option - but this is no news to most Australians who are blessed with one of the most robust property markets in the world and have a cultural understanding of the value of owning their own home.

Australia has had some of the highest home owner occupancy rates in the developed world, for a long time, but investing in serviced apartments is a relatively new real-estate investment strategy that’s slowly gaining traction in Australia, and globally too.

So what are serviced apartments?

Serviced apartments can be a convenient and cost-effective accommodation option for leisure and business travellers looking for extended-stay accommodation that resembles apartment-style living.

What’s the difference?

The difference between more ‘traditional’ accommodation, such as hotels and motels, is that serviced apartments provide more of a ‘home away from home’ feeling. The guest is provided with a self-contained apartment-style environment to stay in where serviced-apartment facilities replace restaurant, bar and laundry services and the guest has the space to live at a comfortable personal pace.

There are some desirable similarities with hotel or motel equivalents though: serviced apartments also have the added benefit of the hotel-like environment that’s often enjoyed by guests - and various perks and discounts are often available for stays of 30 days or more. Serviced apartments are usually fully-furnished while offering greater privacy. And some services like valet laundry are usually available too.

A wide range of accommodation options are available within complexes, from studio apartments to one-bedroom and two-bedroom units.

Is it wise to invest in serviced apartments?

With the steady growth of business travel and tourism in many parts of Australia, and consequently high-to-full occupancy rates, serviced apartments are becoming more widespread across major cities. There are various elements of risk involved when buying serviced apartments as with any type of investment - however serviced apartments offer relatively strong returns with relatively low risk.

Some of the major benefits of investing with the big players, like Quest, include:

  • A fixed rental income
  • No vacancies (100% tenancy)
  • Long term lease
  • Tax and superannuation benefits
  • No management fees
  • No letting fees
  • No repair and maintenance obligations

In addition, typical residential properties rely on bureaucratic negotiations with the tenants - as well as the many costs associated with being a landlord – but these issues are mostly taken care of for serviced apartment investors and the management fees are minimal.

SMSF investment

Self-managed super funds are the fastest growing segment of the superannuation sector. As a member and trustee of an SMSF, an investor has more superannuation investment options than relinquishing this control elsewhere or to a large organisation.

So where do serviced apartments come in? Many investments are subject to the uncertain market conditions but this volatility can result in financial stress and unpredictability. Investing in a serviced apartment is a good SMSF strategy as serviced apartments can be a relatively safe and predictable investment option – and there are significant taxation benefits associated with SMSF investment too.

If you’re an investor then investing in a serviced apartment is certainly something to consider over the coming year.

For more information on serviced apartments, visit one of the most trusted Australian brands in the sector: Quest Properties.

The above information is supplied by Quest Properties.

Disclaimer: while due care is taken, the viewpoints expressed by sponsors
do not necessarily reflect the opinions of Your Investment Property.

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