Serviced apartments are great property investments in Sydney and you’ve got many pros going for them – however, you’ve got to do your homework and understand what you are buying and whether this type of investment would suit your needs.
Let’s start with the technical definition of a serviced apartment: It is a self contained apartment available for short-term stays for up to 3 months.
We sell and manage serviced apartments in many buildings in Sydney CBD and Inner Sydney and can say every building and apartment are very different in their nature and in their situation.
Hence, we have written this short article addressing the frequently asked questions we get on a daily basis from investors on buying serviced apartments in Sydney.
What does serviced apartment mean to me as owner/landlord?
- Your apartment should only be leased 3 months at a time
How is it different from buying a unit in a hotel?
- A hotel investment is a different kind of property investment altogether. With serviced apartments you have a lot more flexibility and choice when it comes to what you want to do with the apartment: you can get a managing agent and get them to run the show, you can run Airbnb or simply use the apartment as a holiday home. You can’t do any of that with a hotel investment.
Who determines whether a building is serviced apartment?
- Council does at Development Approval stage. You can’t really change the building zoning, it will be very difficult.
Can I live there as an owner occupier?
We get this question on a daily basis, multiple times a day. The simple answer is, you are not supposed to. In many cases, you cannot as you have leased it to someone (a serviced apartment operator) or bought it with a lease in place.
If you haven’t leased your apartment to anyone you can actually use it as a holiday home – it’s your apartment after all – however, you are not to use the apartment as your primary residence/family home.
- You cannot use the apartment as your primary residence/family home but you can use apartment as a holiday home (given that there is no current lease in place).
Can I choose who manages my property?
You absolutely can.
Most owners chose a regular managing agent (property manager) to take care of the leasing and managing of the property. It’s the same as having any other investment properties really.
Note: Your property manager should be familiar with serviced apartment buildings and should have experience managing serviced apartments.
On that note, we do manage quite a few serviced apartments in Sydney CBD.
- Every building generally has one main hotel/serviced apartment operator. If you chose to lease your apartment to them (most operators would lock you into a minimum of 10 year contract) then they would become your tenant and would pay rent to you. If this is your case you don’t really need a managing agent.
- If you buy an apartment that is not under any agreement with that operator you may choose anyone (including your cousin Shaz) to run the serviced apartment. You can even DIY however we wouldn’t recommend that option.
You can get a regular property manager –or- lease your apartment to the main building serviced apartment operator (always on a long term contract) -or- manage it yourself. We wouldn’t recommend the ‘self manage’ route it unless managing apartments is your forte (a.k.a you are super organised, got heaps of time, assertive and understand tenancy laws).
Will people come and clean my apartment?
It doesn’t quite work like that in the sense the question is asked. If you’re wondering whether building management or strata sends daily cleaners to clean every apartment in the block – the answer is no.
Pros in investing in Serviced apartments:
- Higher rental returns – you get much better return on investment/cashflow
- Lower vacancy: When your tenant (serviced apartment operator) has vacancy in your unit they still have to pay rent – meaning you experience no financial let downs from the vacancy
Cons in investing in Serviced apartments:
- Harder to get loan – banks will treat as commercial property and would only lend you about 60% value (vs. 80% with regular residential apartments) so you’ve got to come up with a larger deposit.
- Slower to grow in capital compared to normal residential apartments. This is mostly due to “can’t live there” and “harder to get loan” factors.
Disclaimer: All information contained herein is gathered from sources we consider to be reliable, however we cannot guarantee or give any warranty to the information provided.