"Why the banks don't like my latest property purchase"

Carmella Rowsthorne

Carmella Rowsthorne explains why she bought a serviced apartment in a city many people are steering clear of – even though it makes the banks nervous. 

“Darwin was a new experience for me – it’s the first time I’ve purchased a self-serviced apartment – but the seventh property in my portfolio.

The banks don’t like self-serviced apartments, and I can’t understand why. It’s very much a ‘set and forget’ type of arrangement.  The only thing I have to pay out of my own pocket is the strata levy. So everything is taken care of – the management fees and the cleaning and all that sort of thing. There’s even a maintenance pool, so if there are any repairs they are taken care of. That’s a welcome relief from the rest of my portfolio. 

It’s a long-term investment. It’s less hassle, and it would seem ideal for something like a self-managed super fund. You’ve got a set amount that they agree to pay you each month and it more than covers the mortgage.

The property itself is a one-bedroom apartment on the 14th floor of the Mantra complex. The building is only four years old, and my apartment has views across Darwin Harbour. 

Mantra has three options for apartment-holders. I’ve elected to just take a set monthly fee. Under this option, at the end of the 12 months, if the apartment has been rented at a higher than anticipated rate, I’ll receive a dividend. This agreement will be reviewed after 12 months. 

I purchased the apartment for $370,000. I did have hesitations when purchasing this kind of property, because while I’m leasing it for the long term, I do know that the banks do take issue, when it comes time to borrow again, with using the equity in serviced apartments.  There should definitely be equity in this property, because it’s below the median price of the area – I always buy below the median price. Banks also demand a higher deposit for serviced apartments, although I’m certain that I will be able to recoup this when it comes time to sell. 

I’ve had Darwin in mind for about five years now. It’s a very different city. The investors there have done very well over the last probably eight to 10 years – its values keep increasing. It’s a capital city that’s fuelled by all of the different driving forces, like education, including the Darwin University. It’s very high in military personnel, particularly with the training of the American troops at nearby bases. But also it’s fuelled by this massive gas plant, Inpex. The coal seam gas industry is massive in Darwin. 

So Darwin itself has a rather transient population and these people like to be in the city, to be able to walk to the harbour as well as to the city and to the restaurants. 

Being in a capital city is a key criterion for my purchases now. I’ve had negative experiences with a couple of the regional properties in my portfolio, where capital growth and rental yields have both been impacted by the region’s reliance on single-faceted industries. Darwin has a good history of capital growth, but also good returns which is suitable for me because I’m after cash flow from my portfolio.

The other thing I did differently with this purchase was to use the services of a buyer’s agent. It was a good experience overall, but being a keen property hunter, I miss the scout around myself. I enjoy looking for properties myself. My reasoning was that I don’t know the market in Darwin and it’s a long way away from my base here in Sydney.”

Property details

1-bedroom, 1-bathroom serviced apartment
December 2014
Purchase price: $370,000
Rent: $750p/w
Rental yield: 10.00%


"Why the banks don't like my latest property purchase"
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