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Commercial Property Hotel Investing

Discussion in 'Real Estate' started by DaveA, 21st Feb, 2007.

  1. DaveA

    DaveA Well-Known Member

    Joined:
    19th Feb, 2007
    Posts:
    617
    Location:
    Sydney, NSW
    There seems to be a number of Hotels appartments for sale on realestate.com. They all seem to offer fairly high yields, and there was one in Canberra offering something like 21 free accomodations nights free for owners. So im wondering, does anyone actually own one of these? Or if you have looked at investing in one why didnt you?


    i remember reading in someones post before banks will only value them with a LVR of like 60% because there oversupplied, is this the case? It seems body corp fees seem cheaper than some strata fees in appartment city blocks ?

    Im also talking the ones who pay you a set lease fee per year, not they lease it out for you and you get however many nights off you...

    Thanks guys
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Location:
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    With most semi-commercial offering like these (includes display homes and such), the high yields you get are usually paid for by the higher up front purchase cost. You don't get something for nothing.

    You need to look very carefully at the fine print - what are the restrictions on you selling ? what are the restrictions on the use of the property ? what are the implications of the managing company going out of business ? can you get a decent LVR ? what are the hidden costs ?

    I'm not saying there aren't any good deals - I haven't looked into it in detail (I did consider some briefly a few years back - but didn't like the conditions imposed). Lots of due-dilligence required.

    My general rule is to never give away control of your assets - and never lock yourself into something that you don't control the outcome of. But that's just me. YMMV.
     
  3. Simon

    Simon Well-Known Member

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    I wouldn't touch these for all the reasons listed.

    They are sold on higher yields for a reason - because the market values them lower than other properties.

    If you know the biggest fool theory then to offload one of these at a profit means you finding the bigger fool to buy it from you :D :D
     
  4. petros

    petros Member

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    4th Apr, 2007
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    Location:
    Athens
    Hotel investing is in general quite risky because of very volatile cash flows due to seasonality and fierce competition. For this reason hotels only in the last 3 or four years started to attract the interest of large institutional real estate investors in the US but traditionally it has not been one of their favorite or even typical property types to include in their portfolios.

    Petros
    Profitable Property Investing in Perspective
     
  5. Jacque

    Jacque Team InvestEd

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    16th Jun, 2005
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    For all the reasons above, and the fact that cg is limited on such investments, I steer clear of them. The other concern is the total lack of control you have over management and fees.
    Also keep in mind that when there are so many generic apartments that are all basically exactly the same, there is little room for value adding and differentiation.

    If you do want to buy a unit, I'd be looking at a smaller older block (larger land value built in) where you can add value and possibly consider joining the executive committee of the owners corp in order to renovate, if required. I just assisted a client in Kirribilli last week who's buying into a block with a DA in place for balcony additions. Something like this on the right block can add significantly to the value and increase your cg overnight.

    In the end, property investing should be about building value over time in an appreciating asset.