While most Australians have to wait until their start to think about home ownership, whether investing in property or buying a home, a small number of Australians are still well prepared to get rich and get well off. If you have a small amount of money to invest in real estate near downtown Sydney or Melbourne, student apartments are a very high return-to-investment option.
But is there really such a steady return from investing in students renting apartment buildings? Let`s find out in this article.
CBD`s apartment in Melbourne
The University of Melbourne is located near the center of the city, with lots of high-rise buildings, mostly small apartments, and a fairly high percentage of students renting. Buying an apartment here requires a down payment of 20%. The vast majority of people who buy homes here are young people who want to get into the property market first with a small amount of savings in their hands and then get started slowly after getting on the express train. Avoid being left behind by the rising tide of house prices.
Adrian Petruccelli, of Greg Hocking property, said: "generally speaking, the rental rate of return on a house here is about 5% to 6% after excluding all kinds of insurance and taxes. The level is actually pretty good, and it`s basically on par with the mortgage month, so if you pay the down payment, you`re basically buying the property. "
But Petruccelli also said the property`s capital-added capacity was not strong and that it would not generate additional benefits other than being able to pay off loans and monthly fixed rent income. If a home buyer can pay off the loan as soon as possible, the property becomes a "cow" of fixed income, giving you a little extra cash income every month.
Non-value-added property
Petruccelli`s question is also a concern from property consultant Richard Wakelin, who does not advise people to use apartments as the first investment property. "the supply of apartments in the city centre is endless, and there is a lack of comparison of similar properties, so it is often impossible to sell at a high price," he said. A good investment property should add between 7% and 10% a year, but that kind of apartment may be less expensive when you buy it 10 years later than you do when you buy it. "
"if you`re not going to live in it yourself, you`d better not buy it," Wakelin said. "that kind of property isn`t suitable for investing in a house. Instead, you can look at old-fashioned one-bedroom or two-bedroom apartments outside the city center, which are sometimes more value-added than you might think, and can be used as a small-for-large knock on the door. "
Case: old age with rent
Brendan, 54 years old, has a very successful investment experience in local residential and commercial properties. Recently, he purchased two open-ended units, (Studio), for rental purposes in the same high-rise residential property in Melbourne, ideally, His annual rate of return is 6.9%.Brendan: "I want to retire early, and I plan to retire on a fixed monthly income basis, so I bought two apartments so that I could have a stable income," he said. You don`t have to invest all your life in other people`s projects and then get a pension, and if you don`t rent these houses, they can also be used as a home for your children and left to the next generation. "
What are the pros and cons of the student apartment?
Michael Yardney, an investment property expert in Sydney, summed up a few lessons on investing in student apartments. When people think of investing in student apartments, he argues, the instinctive understanding is that returns are stable, risk is low, and that in addition to being able to pay off the loan, it can provide a small stream of returns, but there are some problems that are easily overlooked.
The first is higher maintenance costs. When students rent a property, they need a safer environment, more convenient living conditions and a full range of in-property facilities. At the same time, the student tenants who come and go constantly have also increased the maintenance costs of the apartment, the use of the house is very high, the cost of the apartment management is also higher, as the landlord, to deal with different tenants, frequently look for the next home, In fact, it is also the cost of their own time.
Second, because the student`s life is arranged according to the semester, it can not help but create the leisure of the house. At the same time, because of their own financial constraints, students may not pay you for the high price, your final rental price may be much lower than you originally expected. And the above-mentioned low asset growth rate is also a major disadvantage of this apartment building.
