Pros and cons of buying an apartment and renting back to a hotel

[Aston]

Not a criticism Aston as we all have to make decisions and choose what works for us but 3.8% seems a bit on the low side ?

I understand your comment ermat. But 3.8% net suits me because I am still invested in real estate but without all the hassles generally associated with it.

I know investors with broken down old houses, who are struggling to get them insulated and fitted with heat pumps etc. Many of these people are achieving not much more than 4% net.


At the end of the day who's better off?

[ermat]

Point taken. so is the 3.8 an average of your properties. do you own less than 5 ?

[Nick G]

well comparing two low cashflow situations isn't really a snapshot of the wider market. My average is 8% nett. However if you're happy with your risk/return profile who are we to judge.

I'm going to check these out now after this thread. We have access to list some and I'd always stayed at arms length. More research required.

I understand your comment ermat. But 3.8% net suits me because I am still invested in real estate but without all the hassles generally associated with it.

I know investors with broken down old houses, who are struggling to get them insulated and fitted with heat pumps etc. Many of these people are achieving not much more than 4% net.


At the end of the day who's better off?

[eri]

better returns than most hotel leases

https://www.trademe.co.nz/property/residential-property-for-sale/auction-1831855507.htm?rsqid=7d7147f686e640dfaa7d1641fc087c39

[Davo36]

better returns than most hotel leases

https://www.trademe.co.nz/property/r...7d1641fc087c39

Yeah but $400 pw gross. So they can just up the expenses and you still get f**k all.

Interesting that you can negotiate you own lease deals though Aston. Not sure how you do that? Isn't there a lease in place when you come to buy it?

[eri]

^

afaik

the expenses would be rates $1300? and bc $3000?

and the lease amount would probably have been negotiated directly between the owner and hotel

[Aston]

Yeah but $400 pw gross. So they can just up the expenses and you still get f**k all.

Interesting that you can negotiate you own lease deals though Aston. Not sure how you do that? Isn't there a lease in place when you come to buy it?

Each of the apartments that I bought were not in the hotel pool. They were keen to get them in and I basically got what I asked for.

[eri]

^

yup this is what happened in ak too

lots of hotels were built in the early 2000s with individual owners leasing back to the hotel under very favourable terms to the hotel

in 2008 with the downturn in tourism after the GFC, many owners were left with very poorly performing "hotel investments" that would perform much better as standard rentals

so 40%? of owners pulled their units out of the hotel pools

this is actually how the system is designed to work and allowed most hotels to keep running on massively reduced occupancy

(heritage hotel on hobson, couldn't honor their leases and folded, metro? in metropolis had so many owners leave they had to close, and the sebel hotel had a big court fight with owners who left the pool after the hotel tried to refuse them access to the entrance of the hotel....hotel lost)

BUT 2014? tourism numbers started climbing again and the hotels, having to turn away guests due to insufficient rooms, started contacting owners who had left the pool and offering them MUCH better leases to get the rooms back........ again, how the system is designed to work

[Davo36]

That's interesting eri.

[Davo36]

Each of the apartments that I bought were not in the hotel pool. They were keen to get them in and I basically got what I asked for.

Oh I see. Nice.

[Dens]

My average is 8% nett.

What sort of properties is that? Bought recently or held for a while?

[mayworkz]

Quick question Aston, do you mean only in a complex without a swimming pool?

[QUOTE=Aston;438334] Personally I would invest in CBD area only in a complex without a pool. Tourist destinations attract younger people/families etc. meaning more wear and tear, more noise, translating to higher BC fees. Out of Auckland only.

[Bluecoat]

^

yup this is what happened in ak too

lots of hotels were built in the early 2000s with individual owners leasing back to the hotel under very favourable terms to the hotel

in 2008 with the downturn in tourism after the GFC, many owners were left with very poorly performing "hotel investments" that would perform much better as standard rentals

so 40%? of owners pulled their units out of the hotel pools

this is actually how the system is designed to work and allowed most hotels to keep running on massively reduced occupancy

(heritage hotel on hobson, couldn't honor their leases and folded, metro? in metropolis had so many owners leave they had to close, and the sebel hotel had a big court fight with owners who left the pool after the hotel tried to refuse them access to the entrance of the hotel....hotel lost)

BUT 2014? tourism numbers started climbing again and the hotels, having to turn away guests due to insufficient rooms, started contacting owners who had left the pool and offering them MUCH better leases to get the rooms back........ again, how the system is designed to work

Could this happen again?

[Beano]

Could this happen again?

Yes I believe it could .
Is anyone in a hotel pool that could comment ?
Don ha real estate marketed some under the Ramada brand

https://www.donha.co.nz/apartment-for-sale/unit-101-123-taranaki-street-te-aro-rmr11533

The yield was 5.2% gross I believe.