Interesting article published in the AFR a couple of weeks ago. Apollo owns 25% of Camplify.
Caravans: an affordable investment asset you can also negatively gear
Michael Bleby
May 24, 2019
Australian Financial Review
Alan Spicer owns his own home and doesn't want more property. But the Newcastle-based accountant has, partly to his own surprise, been building up wealth in another asset that also benefits from negative gearing but is lesser-known – caravans.
Spicer, in fact, now owns three vans, two based in Brisbane and one in Melbourne. He's never seen them – they're leased and managed by other people – but they pay their own way and he expects to make a capital gain at the end of the five-year period he expects to own them.
"Never in my wildest dreams would I have thought I would tell anyone I own caravans!" Spicer laughs.
"But the reality of it is quite different. I’m diversifying my portfolio – I own shares and have caravans, too. I own my own house, but don’t have a rental property."
Newcastle accountant and caravan investor Alan Spicer. Peter Stoop
Even as residential property retains its negative gearing and capital gains tax deductions – benefits the asset class was likely to see reduced had Labor won last weekend's federal election – the attraction of a sharing economy investment like caravans will grow, Spicer says.
"I still think it’s attractive, " he says. "I spend $65,000 on a caravan and [could] spend $650,000 on a rental property. Affordability is a huge factor in terms of people investing."
And the lack of a dampener on the housing market – and signs this week pointed to an earlier-than-predicted trough in the eastern state-dominated market – might actually make people look for alternatives if prices start rising faster than wages.
"The affordability of housing generally is going to hamper the growth of people going into property as an investment, irrespective of the government," Spicer says.
'It’s a kind of perfect share-economy item'
The 680,000 caravans, camper trailers and motorhomes – known collectively as Recreational Vehicles, or RVs – registered in Australia benefit from a tax ruling that allows owners using them commercially to offset costs against other income.
The national fleet is underutilised – industry figures released this month show RV owners use their vehicle 40.9 nights of the year on average, with a median value of 21 nights. And once the domain of retired grey nomads, the profile of owners is also changing, with the average age of owner now 33.
This creates an opportunity for investors.
"It’s a kind of perfect share-economy item," says Justin Hales, the founder and chief executive of caravan-sharing platform Camplify, through which Spicer rents out his vans.
"It’s a high-investment cost. It costs a lot of money to maintain and such low usage it’s got a such a huge amount of time available to share it. It’s a large per-night return when you’re hiring it out on a platform like ours."
The sector is still small, but already has other players, such as ASX-listed CollaborateCorp's MyCaravan and ShareaCamper, which lists vehicles in Australia, NZ and Germany. They're all riding on the tech-enabled sharing economy, which allows people to make money out of under-utilised assets.
Camplify, which calls itself the market leader, has just 3000 RVs on its platform in this country and a further 500 in the UK, but demand for caravan holidays is growing among an unlikely group, Hales says.
"For Millennials, it’s actually a combination of what can be a really good low-cost holiday but it also allows you to do things like disconnect from social media, but still have Instagram-able moments for when you get back to work," he says.
Spicer says rental demand fluctuates, but not as much as he thought it would. School holidays are the peak, but outside of holidays the retiree demand kicks in.
His vans sleep five people and cost about $65,000 all up to buy and equip. He makes an average gross return of between $1500 and $2000 on each van. Financing costs and repayments are about $1500 a month and annual registration a further $300.
He has had to pay out very little of his own cash so far.
"When I did my original numbers, I thought I may have to put in money at the start to fund my initial payments until I get enough cash," Spicer says. "But so far, the cashflow from that has exceeded my expectations."
Similarly to a holiday house, RV costs – in proportion to the number of days they're available for hire – can be offset against other income. Depreciation costs give him a further deduction.
By the end of their five-year working life, the market value of a van is roughly half its original price tag, he says.
"I might have a van worth $30,000 at the end of it," he says ."A $60,000 van might be depreciated to a $20,000 cost at the end. I can sell it for $30,000 and make a gain of $10,000."
https://www.copyright link/real-est...-you-can-also-negatively-gear-20190516-p51o1w
