Property Investment - Apartments
Renting out houses as investments make pretty good financial sense over the long term (house prices tend to double in price every 8 to 10 years) but what about Apartments?
Initially, you have to ask yourself, what am I investing for? Is it long term capital growth or short term income from rentals? Usually, older individuals invest for short term income rather than long term for obvious reasons!
Apartments generally do not make good capital growth investments as historical property prices have in fact reflected the price of land and as an Apartment owner, this land price is not reflected in the value of the unit itself. Developers are using all sorts of tactics to sell apartments at present such as 'rent guarantees'. It is worth thinking about what happens after the rent guarantee runs out and if the figures don't add up then, they most likely won't add up now. Also will the developer offering the guarantee be around to follow through on it? Most Real Estate agents know that these guarantees are a marketing trick and tend to reflect the flaw in the Apartment market as a whole. (Why offer something when you don't need to?)
Also, think about the mortgage financing for Apartments, it is tricky with most Banks not going over 60 or 65%. This might be OK for you, but think about your potential buyer a few years down the track?
Aside from not owning the property, another factor is the potential for oversupply. Developers can effortlessly put up a block of new Apartments, quickly and therefore further diluting the potential market. The old rule of supply and demand kicks in and as an individual you have very little control.
The fact above together with high Body Corp fee's and maintenance issues means Apartment buyers need to carefully consider before making the move. In terms of rental return, around 7% warrants a house purchase but near 10% is required for Apartments - 23208
Initially, you have to ask yourself, what am I investing for? Is it long term capital growth or short term income from rentals? Usually, older individuals invest for short term income rather than long term for obvious reasons!
Apartments generally do not make good capital growth investments as historical property prices have in fact reflected the price of land and as an Apartment owner, this land price is not reflected in the value of the unit itself. Developers are using all sorts of tactics to sell apartments at present such as 'rent guarantees'. It is worth thinking about what happens after the rent guarantee runs out and if the figures don't add up then, they most likely won't add up now. Also will the developer offering the guarantee be around to follow through on it? Most Real Estate agents know that these guarantees are a marketing trick and tend to reflect the flaw in the Apartment market as a whole. (Why offer something when you don't need to?)
Also, think about the mortgage financing for Apartments, it is tricky with most Banks not going over 60 or 65%. This might be OK for you, but think about your potential buyer a few years down the track?
Aside from not owning the property, another factor is the potential for oversupply. Developers can effortlessly put up a block of new Apartments, quickly and therefore further diluting the potential market. The old rule of supply and demand kicks in and as an individual you have very little control.
The fact above together with high Body Corp fee's and maintenance issues means Apartment buyers need to carefully consider before making the move. In terms of rental return, around 7% warrants a house purchase but near 10% is required for Apartments - 23208
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posted by X - Men @ 4:58 AM
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