Hot Investment Property

I didn’t expect this hot property in Wollongong.These are 1 bedroom serviced apartments in mortgagee hands.The apartments are locked in for 6 years with a further 2 x 5 year options under the current manager Medina. The yield is around 8% and they are looking for offers in the $155,000 – $165,000 price range!

But lets look at the whole package. The building is new and is beautifully maintained being only 200 metres from the beach. It is close to shops, restaurants and cafes. So why don’t banks like lending against great serviced apartments?

Banks are concerned that maybe the property manager might fail or not take up options for further years. Their rationale is that the rental cash-flows might be threatened and so valuations might be discounted. But this property is already heavily discounted. A comparable 1 bedder sells for around $340,000 in the area. So if the property manager extinguishes the serviced apartment relationship, you are left with an apartment worth $140,000 more than you paid! Yes that is not a typo – “honey get the car” 

“By Shane Clinton”

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