QUEST apartments

Hi everyone,
I came across an advert the other day for 'QUEST' apartments
for sale.
Having never heard of these before I contacted the agent and was advised that they are for sale, and the tennants are
'QUEST' who lease the place for a five year term, with option
for a further 5 years.
Yield worked out at about 6% if you paid full price for
the place. Located in Dandenong Victoria.
Has anyone ever heard or know anything about QUEST apartments, and does anyone have any thoughts on what CG may be in the Dandenong area.


Biggy

Hi Biggy

You can search Quest on google or other search engines.

You can also search 'serviced apartments' on this forum, there have been quite a few threads on this subject.

Serviced apartments are considered to be a commercial arrangement, so if you are looking at buying one you will only be able to arrange 65% or maybe 70% as a first mortgage, and will have to fund the balance of the purchase from other funds.

Keep in mind, too, that if the individual apartment is less than 50msq there will be further funding restrictions.

Quest have a good service model but you will need to read the contract carefully to understand what you pay for and what the service operator pays for.

Depreciation on serviced apartments can be very good, so if you have a high income you can get a very good return when tax benefits are taken into account.

If Quest are paying body corporate fees such as insurance, and the rental return is 6% net, they you are actually getting the benefit of 'pre-paid' expense, too, which from an accounting point of view actually increases your 'true' yield.

Generally speaking, serviced apartments are good for the experienced investor who has a variety of property types in their portfolio. They are definitely of the 'buy and hold' variety, although the building my son's apartment is in has shown good capital growth over the past three years and resales have achieved surprising results. His was revalued twelve months ago by the bank at 80% above purchase price. We are coming up for another valuation now for further borrowings against the property and if commercial yields are taken as 4% (he earns 7.5% of original contract price) then it should come back at 114% above purchase price in four years.

Some deals are good, some are not so wonderful. Do your homework. Serviced apartments can be a true 'blue chip' property investment.

Cheers

Kristine

Biggy,
What K. says is all true.
Tread very carefully.
The deal on serviced apt's is only as good as the business acumen of the operator.....in this case "Quest".
The deal will come with a lease document. Make sure you understand it thoroughly. Get legal advice if you are the least bit wary or innocent in these matters.
I have one of these in the portfolio. The "blue chip" operator went broke and did get taken over by a new operator.
We were just plain lucky not to come a cropper.

Definitely not for the novice.....(no insult intended mon ami !)

LL

quest are a large operation, here in st kilda they have at least a dozen serviced apartment buildings. all of them do very well with a constant stream of tourists. a few apartments come up for sale every now and then which are serviced by quest. a one bedroom unit came up around the corner from me and the numbers looked good on it.

I personally wouldn't touch a serviced apartment deal in dandenong with a return of 6% when I can get better than that in Melbourne city in student accommodation.

but that is just a personal opinion. Remember that the unit should stack up on valuation on an owner occupied basis as Quest my go belly up....think of parmalat...

cheers,
RightValue

Be very careful. Although a large and successful company they have a tanished name in Brisbane in a block where I own a unit. Some issues: nonpayment of rent, extremely high body corporate fees (no control over this) and wording of lease totally in their favour. Don't even consider it.

Hi

Yes be very careful and read the lease with a magnifiying glass.

Its is all there own way you bascially give them full control. Also the rents they pay are not as good as the private market. This is because they say it is a guarantee.

I have had some dealings with them and there melbourne office is hopeless when it comes to returning calls. Promises, promises stalling until they are good and ready.

regards
BC