Serviced apartments are units that are short-term rentals rather than long-term homes. Traditionally, they are investment properties utilising management agreements, pooled rent or tenant restrictions. Banks and other traditional lenders view serviced apartments as high-risk because rental income can be low and resale can be difficult, especially if a management agreement is in place. However, despite the high risk, some lenders do approve loans.
Borrowing amount
The amount you can borrow depends on the lender’s requirements and the type of serviced apartment you invest in. In general, lenders use the following guidelines:
- If your unit is not a serviced apartment, but most of the neighboring apartments are, you may be able to borrow 90% of the property’s value.
- If your apartment can be released from its management agreement within six months without any fees, you can borrow 80% of the property’s value.
- If your apartment is in a restrictive contract, you may be able to borrow 70% of the property’s value.
- If your apartment is part of a resort, you can borrow between 60 and 70% of the property’s value.
- If your apartment is in a metro area, can be released from its management agreement within six months without any fees, and you are applying for a low doc loan, you can borrow 70% of the property’s value.
- If you are applying for a guarantor loan, you may be able to borrow 105%.
Some lenders have additional criteria your apartment must meet if you borrow between 70 and 80% of the property value. Utilising a broker can help you find the right lender. Mortgage brokers can assess your situation and access the loan terms of many different lenders to help determine which lenders are a good match. Even though traditional lenders view serviced apartments as high-risk, it is possible to secure a loan. Mortgage Street is a non-bank lender specialising in high-risk loans. Our team of brokers can find you a loan with competitive interest rates so you can invest in serviced apartments.