The New Alternative Property Investment

Shaking off the stigma of being run down and dingy, the modern boarding house is marching up the ranks of sought after property asset classes.

The new generation of boarding houses are seen to provide a more stable income platform in comparison to backpacker hostels according to Savills Hotels market report 1H/2015.

Changes to government policy has also helped, especially in New South Wales with the State Environment Planning Policy (Affordable Rental Housing) being published in 2009 to increase the supply and diversity of affordable rental and social housing in NSW.

This has paved the way for new investment opportunities targeting this particular market segment. So what does the new boarding house look like?Many of them now include private bathrooms (or shared amongst only a handful of tenants) private food preparation areas and some resemble studio apartments which are self-contained. Designed to be smart, funky and contemporary they suit students, young working singles and couples.

Savills suggests that they are a superior investment to other investment opportunities such as backpacker hostel accommodation providing more stable income and less seasonal fluctuations in occupancy rates. Tenants are more likely to stay for weeks and months as opposed to days.

Students are obviously a prime target with the recent increases in numbers of international enrolments in Australia.

Related reading: Student Investment Boom Rolls On With New CBD Tower McCarthy Maisonettes, one of Tone Wheeler's completed developments in Annandale NSW.[/caption]He also cited the rental returns being achieved as an indicator of the attractiveness of this type of investment.

“A huge number of [boarding houses] are being planned and built,” he told thefifthestate.com.au, “and a lot are being built with super money.

“A lot of investors haven’t told anyone because they’ve found a good investment and they don’t want others to know.”

Boarding houses however can have difficulties in terms of management which need to be taken into account.

Colliers report author Christopher Milou wrote: “In comparison to residential, boarding houses cannot be strata subdivided. Also given the relatively unique asset class there is a shallower pool of buyers chasing boarding houses and as such selling periods can be somewhat prolonged. They can also be more difficult to manage than standard residential apartments which could increase the cost of management.”

Internal view of one of the McCarthy Maisonettes[/caption]

McCarthy Maisonette images from thefifthestate.com.au