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What to Ask Before Buying a Serviced Apartment

Like any investment, purchasing a serviced apartment is a big decision. This list of common questions will help you evaluate whether a serviced apartment is right for you.

How does the lease relationship work?

When you buy a serviced apartment, you lease it on a long-term basis to a third party operator, who then lets the room for short stays, like a hotel room. Your tenant therefore is the accommodation company, rather than the individual guests who will stay in your room. This means that you will earn your rent, regardless of whether your apartment is occupied or not.

How long are leases usually for?

Leases for serviced apartments are usually for the long-term, starting at five, seven or 10 year terms, with options to extend in additional five-year lots. The specific terms will vary from one serviced apartment company to the next, and also between different properties, but the benefits here for investors is that they can rely on that lease to be fulfilled for that period, without worrying about loss of income due to vacancy.

What happens at the end of the lease?

Normally, the tenant will have a few options left to extend the lease terms. Once all options are exhausted and no further tenure has been granted, the property will be let on a month-to-month lease until either party gives notice. At the termination of the lease, the apartment will be vacated and the keys handed back to you as the owner. From there, you can do whatever you wish with the apartment (subject to council zoning and approvals).

What happens if I want to sell?

You don’t have to wait until the end of the lease to sell your serviced apartment. If your circumstances change and you choose to sell your apartment, you can sell at any time with the lease transferring to the new owner.

What are my outgoings?

This will vary from property to property, and will also differ between serviced apartment leases. With Quest, for example, owners generally pay for council rates, water rates and the owners’ corporation sinking fund, with the tenant paying the owners’ corporation admin fund. Serviced apartments also need capital works from time to time, in order to maintain the property to the required standard. These costs are usually borne by the owner of the apartment, so make sure you carefully review the lease terms surrounding capital refurbishment works.

How do I know which serviced apartment property company to choose?

As with any investment, do your research. Quest Properties specialise in selling Quest Serviced Apartments, which has over 150 locations and more than 5,000 apartments,  making it Australia’s largest serviced apartment network. With a 20 year history, and a reputation as a leader in the Australian serviced apartment industry, Quest is among the top 15 serviced apartment providers in the world.