Furnished or Serviced??

Hi all,

I Need some advice.

I had an ip valued the other day. Atm it is being rented as a furnished rental. The ip is located in a typical apartment block, where there are owner occupiers, other furnished rentals and normal rentals. Its located in Nth Sydney CBD and is a studio with a car space.

The valuer has told the bank that it is a serviced apartment and now the bank has dropped the amount they will lend me by quite a large amount.

I thought the difference between a furnished property and serviced apartment is the following:

Serviced:
Usually the building is owned by someone like Quest who rents the properties on a daily/weekly/monthly or whatever basis.
They clean the premises on a daily basis.
They have a person/reception there who take bookings and look after them.
The properties are all owned by investors.

Furnished:
Any property in any apartment complex could be rented out as furnished, be it studio/1,2,3, bedder etc. if bc allow it.
Other properties in the building are owner occupiers and normal rentals, there can be a mix of all.
Rentals for furnished can range from daily/weekly/monthly/yearly etc.

Why has the valuer stated that mine is serviced

Do I have the right idea on the classsification between the two

If so, do I have a case to challenege the valuer?

Thanks,

Stevec.

 

Stevec,

Your definitions sound fine to me. Some buildings have a mix of long term renters / owner occupiers and short stay / serviced in the one building. We have a long term rental in NZ with short stay / serviced in the same building but not advertised as a Quest or similar. Is your building one of these (what's normal these days?), maybe the valuer got confused what your apartment really was?

Dave

 

That sounds like the valuer has overstepped his bounds.

Call him and tell him what he has done.

A serviced apartment is not a furnished apartment - serviced implies a cleaner and laundry service etc.

 

Yes, phone the valuer and/or the bank and challenge the valuation, particularly if it is based on an erronious assumption.

Serviced appartments are viewed as oversupplied by the lenders at the moment, and hence the downgrading in the amount borrowable. If the apparment is reclassified, it should return to the expected LVR, provided that it is not in an oversupplied area (for appartments).

Ask your broker to check with the valuer (they talk more to brokers than they will to borrowers) as to the reason it was classified as serviced, it COULD (but not necessarily) be a better val than otherwise (depending on the relative supply of serviced vs furnished appartments in your area). I guess what I am saying is; check to see if you are getting the best deal before you challenge it.

Also, is it the same bank as loaned you the purchase price? If so check to see what they classified it as at purchase, if different then ask why, if the use has changed since then (was serviced but you took it out of the pool) then that may be the source of the confusion and you may need to explain that it is no longer serviced.

Just my 2.2cents worth (inc GST ).

 

What was the outcome of this in the end, Steve? Would be interested to know. I guess valuers are human and can make mistakes from time to time, just like all of us

 

Thanks for the reply's. I still have no positive outcome as yet. Basically the loan provider, which I may as well state, STG, stand by the valuers comments. I find it so frustrating!

I even contacted the building manager/concierge and they provided a letter stating that it is against the laws of the BC and local council that serviced apartments may be allowed in this building. STG did not even budge.

The only way they will let me proceed is if I provide them a copy of a 6 month lease with 4 weeks bond paid. This can happen, the agent is trying to find someone atm.

Basically my loan has dropped from 80% to 50% due to this stupid valuer. (sorry to any valuers out there, but I find my situation quite unfair) Hopefully my agent will find someone soon and I can get my 80%. My plan was looking good to have all this sorted out and be invested in the Navra fund to a greater extent and receive a nice Christmas present, but now I hope it will all be sorted by the next quarter.

Cheers,

Stevec.

 

Hi Steve,

Did you get it rented? Did StG come to the party?

Cheers, Medine

 

Yes I did get it rented in mid Dec. The tenant was willing to sign a six month lease and pay a four week bond, to satisfy STG requirements. He said he will most probably only stay for 3 months, which is fine by me, as I can then revert to a higher rent. I find STG policy strange, to get the loan approved at 80% they wanted a 6 month lease with bond paid, but now that it is approved it doesn't matter what I do with the property, i.e I can revert back to shorter rental periods, which attract a higher rent per week.

Cheers.

 

All's well that ends well. Good job!