Serviced Apartments - Traps & Pitfalls

Investors can be attracted to Serviced Apartments for many reasons. One reason is higher than average returns - often resales are on yields of 6 to 6.5%. Two, they are told they are a set & forget style investment. Three, there is a long term lease. Four, the tenant pays the body corporate fees. Five, there are no management fees. Six, I can claim excellent depreciation deductions. All these things may or may not be correct. I should know I own more than one serviced apartment. I even have a solid capital gain on paper on the one I own in Townsville.

However, in the re-sale market the above sales pitch needs to be tested. Not all serviced apartments or the individual operator or the body corporate management are equal. If you want to know what due diligence you ought to conduct before you buy a "second hand" Serviced Apartment, you need to ask a few questions rather than just listen to what you are told.

This advice is not saying "dont ever buy a serviced apartment" as I and many of my clients own one or more serviced apartments and they form an integral part of a balanced property portfolio, balanced between capital growth and yield.