Investing in Resorts

[prawn_86]

Does anyone have any experience investing in resorts/serviced apartments?

We are considering a small entry investment and think we have located a few decent priced properties to suit our budget, but a lot of them are actually units within a resort. Is there anything in particular we should look out for? Obviously vacancy rate is one thing, but looking for other ideas.

Thanks

[jbocker]

Hello Prawn86

I don’t have any experience with resort investments, but have looked at a few. I will only mention what swayed me from investing. These could be unjustified, and would love to hear from others where I may be wrong. Anyway that’s how I felt.

Found that in ONE resort the developer was still selling units even after a few years at the same price at the original price, which was somewhat expensive. Some of the existing owners were selling also at the price originally bought; the indication was therefore little capital growth.

There are management and maintenance fees which are controlled by a corporate body (I like to have control of these matters) I felt that their hand would always be out regardless of your earnings.

Always felt that when times were tough resort holidays were the first to go. I.e. Units are sold and/or holiday makers opting to do something else.

I never 'get' the answer to what land component you have, when the resort comes to end of life. (I have the same issue with buying a unit in a block of flats).

If a lot of people sell out at the same time there is selling pressure, in desperate times there could be discounting.

New resorts opening in the neighbourhood, competing for your customers, adding pressure to update your facilities.

What guarantee that units would be let fairly? There is also not real way to determine what amount of rent is coming (ie inconsistent)

Uncertainty of tenant behavior.

I certainly dont want to put you off. Have you considered a small unit with its own title. Cheaper and more likely to have a consistent income with longer term tenant(s).

Cheers
JB

[MelbKate]

Hmm I'm with JB on this one. We also had a good look at it and while the annual returns are attractive, the capital growth was just too slow for our liking. Also the risk of long periods of vacancy and high management fees would make it too expensive to hold.

[kristinthomas21]

Investing in the stations is carried sharply in the long run, when more people are choosing to take holidays in different regions of the world. The main advantage of investing in such property is the net cash income from the station. However, you should make sure you have good marketing strategies to help you successfully promote your station.

[james720]

Hmm I'm with JB on this one. We also had a good look at it and while the annual returns are attractive, the capital growth was just too slow for our liking. Also the risk of long periods of vacancy and high management fees would make it too expensive to hold.

[Bronwyn]

Initially these types of investments look like they have good cash flow, but that is not the experience of anyone I know that has purchased one. The management fees are high and often so are the vacancy rates.

In these complexes the well located properties are booked out all the time and the others sit vacant, but you all share the profit. If you have a property that is well located in the complex (ie - views or easy access to amenities) your property will be booked more often (so you have greater wear and tear from a large number of short term occupants) and if it is not as well located you will have less capital growth, and perhaps greater negative growth if there is discounting when multiple people are trying to sell at the same time.

Perhaps the biggest danger is that you have no control over who manages the property or how well they do. It may be well managed when you buy it and you will base your cash flow estimates on the vacancy rates at that time, but if they sell off the management rights to someone who does not have experience or does not do as well, then it is a completely different situation.

These properties may have a place somewhere in a large portfolio, but unless you have good cash flow and capital gains from other properties to offset the risks, investing in resorts could expose risk that is not easy to walk away from if there are other people trying to sell at the same time.

All the best

Bronwyn

[Alex Barton]

I'd be concerned about tourism dropping, with the strength of the Aussie dollar!

[MurrayDickerson]

To investment in resort that it was best field. Today people are like to eat and most;ly they want new variety and want to go for holiday and spend time in it. So it was best idea to investment invest money in resorts and it will give so many profit to us.

[Davids]

Investing in real estate is a serious matter to consider. Although a worldwide recession may be ongoing, now is actually the best time to invest in real estate. While recession reduces spending, slows down progress in the job market due to layoffs and corporate changes, those who invest in real estate can actually benefit from the situation. Generally, residential and commercial properties are the most common types of real estate property. Most people, however, choose residential property when they want to make a real estate investment and, thus, do not carefully consider the fact that commercial property investment has more rewards to offer.

[realestatesacram]

Definitely, investing on a resort will benefit from the booming tourism industry as well as key factors such as consistent growth in land. Another advantage in offshore investing is the fact that it's one of the best approaches to diversify a good investment portfolio. The main benefit of investing in this type of real estate property is the flow of cash from the resort's income.

[CSQTownPlanner]

Investing in a resort is a good idea. Investment in resort offers a blend of entertainment and excellent returns on your capital. As a resort owner, you can also look forward to lots of sops in the form of tax benefits and concessions from the government as the builders of the resorts typically negotiate with the government for tax and other duties concessions. Hence, having an overseas property for investment is indeed a mouth watering option for you.