Is Buying an Apartment in an Auckland Hotel Lease a Good Idea?

Many people are looking for apartments in hotel leases, because they are a lot cheaper and they want a good return for their money. While others think that these apartments have less wear and tear since it’s in a hotel.

So, is it a good idea to buy an apartment in an Auckland hotel lease?

Before we answer this question, let me first enumerate the things that you need to be aware of in a hotel lease. The first one on the list is GST or commonly known as Goods and Services Tax. An apartment that’s already in the lease is usually zero rated, which means that if you’re buying this type of property – the tax (GST) will be passed unto you. You need to understand that its previous owner claimed the apartment, so if you take it out of the lease then you’re going to pay the GST back to the previous owner.

Another thing to consider is the income. Now, what do I mean by this?You may think that you’re on a good return when you buy this type of property, but is it really adjusted with inflation? What about if the costs increase within the complex? This could lead your returns to go down and that could hurt you in the future, because your opportunity to gain something turns out to be losses in the long run.

The third consideration is the initial costs that you need to bear like a new paint job, payment for a new carpet and other things that you have to pay for since you’re in a hotel. This could mean that this type of apartment is more expensive and you’re required to shell out a considerable amount of money just to own one.

The last factor and the most important one is the lock-in period. You need to know how long you are locked in. Most leases have a contract and it will end in a certain number of years, usually around 10-15 years. If you’re buying an apartment in a hotel lease, make sure that you know when that contract will end. Although you will still not be able to stop the lessor if he/she renews the contract, so this type of property has more negative sides than positive returns.

Should you be buying an apartment in an Auckland hotel lease? Watch out for more insights in the coming weeks.