Many SMSF investors look to property to form part of their SMSF investment strategy. There are a few significant differences for SMSFs purchasing property (as opposed to individuals),but property still offers many benefits to SMSF investors, especially if they look beyond traditional residential real estate.
Diversification in a portfolio is essential to ensure your SMSF isn’t overexposed in one particular market. This includes real estate. There are more options out there to choose from than traditional residential real estate. Serviced apartments for example, can form part of this mix and are well-suited to an SMSF investment strategy. The serviced apartment market is largely based on the needs of business travellers and to a lesser extent, leisure travellers, making it markedly different to the residential real estate market. Serviced apartments still provide you with a property investment, however you are not competing with home buyers or the whims of the residential market.
Serviced apartment investors are also exposed to the opportunity of buying into locations that they may not have otherwise realised offer good investment opportunities. Serviced apartment operators have teams of researchers undertaking due diligence to ensure their developments and purchases are in areas of most need to their customers. This means that investors can purchase a property knowing extensive research into its viability has already occurred. Likewise, with a variety of locations to choose from, investors can choose a location that suits their SMSF investment strategy and budget.
Serviced apartments also offer SMSF investors a more hands-off approach. The structure involves investors purchasing an apartment as part of their SMSF investment strategy, which is then leased on a long-term basis to a serviced apartment operator, such as Quest Apartments. The property is then let out to travellers on a short-stay basis (like a hotel). The benefit to investors is that the operator manages the day-to-day issues of the property (upkeep, occupancy, minor maintenance) while also assuring long-term rental income. For investors, this means that they can offload much of the responsibility for the property management to the operator, and enjoy long-term rental benefits with a more hands-off approach.
Another major plus to investors is that rent is paid to you regardless of occupancy. With traditional residential real estate, investors lose money whenever their property is vacant. Not so with serviced apartments. Your lease is with the operator, not individual guests, and the operator agrees to pay you the agreed rental income, whether they have a guest in the room or not. This provides great security for investors, who are able to forecast and budget according to the long-term lease conditions.
For those looking to diversify their SMSF investment strategy, whether it’s to add real estate or explore different real estate options, serviced apartments offer some substantial benefits. Quest Apartment Hotels have over 150 properties throughout Australasia and are market leaders, with a 25% market share in accommodation, giving investors a great opportunity to expand their SMSF investment strategy.