Serviced apartments are strata titled apartments generally owned by investors and managed by an entity that holds the management rights to the complex the apartments are located in. Mostly rental income from the apartments is pooled by the management company and all costs are also covered by the pool. Many operators allow the property to be removed from the letting pool which is often a pre requisite for finance on good terms.
Serviced apartments fall outside of the mortgage insurer’s scope of acceptable properties. For that reason the maximum LVR available would normally be around 70% but up to 80% with one of our lenders.
The management agreement that the investors sign up for when they purchase a serviced apartment will determine what the maximum available LVR is and if normal residential investment loans are available at all. Loans for some complexes may have to be written as commercial loans.
To be what we call a compliant serviced apartment and therefore eligible for a 70% or 80% LVR, the agreement / lease should allow the following:
If the serviced apartment does not meet all / most of the conditions above but is zoned for residential use we may still be able to get you a 50% to 60% LVR at normal residential investment loan rates. Failing that the loan would have to done as a commercial loan which means you would expect to pay interest rates of around 2% pa more and much higher establishment fees
Further complexity is added to the finance puzzle for serviced apartments if the unit is less than 40m2. Really there is at the time of writing only 1 or 2 lenders who would consider this on normal terms.