Australia’s serviced apartment industry is now worth an estimated $6.2 billion, having grown at an annualised rate of 11.4% over the last five years. That kind of growth catches the eye of any property investor. But buying a serviced apartment isn’t the same as buying a standard residential unit. The regulations, the management structure, and the way you make money from it are all different. If you’re looking at this sector, the rules around planning, leasing, and operator agreements will determine whether the numbers actually work.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
The industry bounced hard from the lockdown lows, driven by a surge in domestic and international travel. But the pace is slowing. Revenue is only expected to rise 1.6% in 2025-26 as households and businesses tighten their belts. That doesn’t mean the sector is a bad bet — it means you need to understand the specific regulations that govern these properties before you commit. Here’s what you actually need to know.
Before you get into the details, you need to understand what a serviced apartment actually is. It’s a fully furnished unit with a kitchen or kitchenette and separate living space, rented out on a short-term or long-term basis. Unlike a standard hotel room, it’s designed for longer stays. Unlike a standard rental, it’s managed by an operator who handles the day-to-day. That operator relationship is central to everything.
What I tend to notice is that buyers focus on the purchase price and the location, but the management agreement is where the real financial outcome is decided. That’s worth weighing against the property itself.
Total costs and what they mean for your return
The purchase price of a serviced apartment is only the start. The full cost picture includes stamp duty, legal fees, and potentially GST if the property is sold as a going concern. But the ongoing costs are where the surprises live. Management fees typically range from 20% to 50% of gross revenue, depending on the operator and the level of service. You also have body corporate fees, council rates, insurance, and periodic refurbishment costs — serviced apartments need to stay looking fresh to command good rates.
Let’s run a scenario. You buy a serviced apartment for $500,000. The operator takes 35% of gross revenue. The average daily rate (ADR) is $180, and the occupancy rate sits at 75%. That gives you gross annual revenue of roughly $49,275. After the operator’s cut, you’re left with about $32,000. Then subtract body corporate fees ($5,000), council rates ($2,000), insurance ($1,500), and refurbishment reserves ($3,000). You’re down to around $20,500 — a gross yield of 4.1%. That’s before mortgage costs. The numbers can work, but you have to run them properly.
If you’re unsure about the legal side of the management agreement, it’s worth getting a second opinion. A service like JustAnswer Real Estate Law can help you review the contract before you sign.
Common mistakes buyers make with serviced apartments
Ignoring the zoning and planning rules
Not every property can legally operate as short-term accommodation. Local councils have different rules about minimum stay periods, noise, and guest numbers. Some areas require a specific planning permit. If the property doesn’t have the right approvals, the council can shut down the operation. Check with the local council before you exchange contracts. A quick call can save you a lot of trouble.
Not reading the management agreement carefully
The management agreement is the single most important document in a serviced apartment purchase. It sets the fees, the term, the termination conditions, and what happens if the operator goes bust. Some agreements lock you in for five or ten years with no exit. Others let the operator change the fee structure without your consent. Read every clause. If something is unclear, ask a lawyer who specialises in property law. The cost of a review is small compared to the cost of a bad deal.
Overestimating occupancy and daily rates
It’s easy to look at a glossy brochure showing 85% occupancy and $200 per night and assume that’s what you’ll get. The reality is often lower. Industry-wide occupancy varies by city, season, and property quality. The average daily rate (ADR) is also sensitive to competition. If a new hotel opens nearby, your rates can drop. Use conservative figures when you run your numbers. Assume 70% occupancy and a rate 10% below the current average. If the deal still works, you’re in a good position.
Forgetting about refurbishment costs
Serviced apartments need to look modern. Guests expect new furniture, fresh paint, and working appliances. If the property looks tired, the reviews will reflect it, and occupancy will drop. Budget for a full refurbishment every five to seven years. That can cost $20,000 to $40,000 for a one-bedroom unit. If you don’t plan for it, the expense will hit your cash flow hard when it arrives.
How to buy a serviced apartment the right way
Research the local market and regulations
Start with the council. Find out what rules apply to short-term letting in that area. Some councils cap the number of nights a property can be rented out per year. Others require a fire safety certificate or a noise management plan. The foreign buyer restrictions also apply if you’re not an Australian resident. Get the regulatory picture clear before you look at any property.
Evaluate the operator’s track record
The operator is your business partner. Ask for their performance data for the specific property or similar properties in the area. Look at occupancy rates, average daily rates, and revenue per available room (RevPAR) over the last three years. Compare those figures to the industry benchmarks. If the operator won’t share the data, that’s a red flag. A good operator will be transparent because they want you to invest.
Review the management agreement with a professional
This is not a DIY job. The agreement will have clauses about fees, termination, maintenance responsibilities, and dispute resolution. A property lawyer or a service like JustAnswer Legal can review it and flag anything unusual. Pay particular attention to the termination clause. If the operator is underperforming, you need a way out that doesn’t cost you a fortune.
Run the numbers with a margin of safety
Use conservative assumptions. Assume lower occupancy, lower daily rates, and higher costs than the brochure suggests. Factor in the management fee, body corporate fees, council rates, insurance, and a refurbishment reserve. If the net yield is still above your target, the deal is worth considering. If it’s marginal, walk away. There will be other opportunities.
Understand the emerging regulatory landscape
Short-term letting regulations are changing across Australia. Some states are introducing registration schemes, caps on letting days, and new safety requirements. These changes can affect your income and your costs. Keep an eye on the news and talk to your local council about any planned changes. Buying into a market that’s about to tighten its rules can be a costly mistake.
Frequently asked questions
Can I live in a serviced apartment myself? ▾
What happens if the operator goes out of business? ▾
Are serviced apartments subject to GST? ▾
How is the management fee calculated? ▾
Can I sell the property while the management agreement is in place? ▾
What is the difference between a serviced apartment and a hotel room? ▾
Regulation is the real gatekeeper in this market
The serviced apartment sector has strong fundamentals — double-digit profit margins and a growing revenue base. But the regulatory environment is tightening, and the management agreement is the document that will determine whether you make money or just cover costs. Don’t let the glossy brochures and the growth story distract you from the fine print. The best deal in the world falls apart if the council shuts you down or the operator takes most of the revenue.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Apartment Buying in AU: Is It Ever Really Worth It?.
Sources and Further Reading
Downsizing to an Apartment in AU: Here’s How to Avoid Regret — A practical look at the financial and lifestyle trade-offs of moving into a smaller property.
IBISWorld (2026). Serviced Apartments in Australia. 🔗
