Buying an investment property is about weighing up the numbers and sometimes a house and the additional costs around land tax just dont make financial sense.
As housing has become less affordable, apartment living has taken off and is appealing to a large majority of renters especially with the added bonus of additional services like, full time concierge, internal gym and communal BBQ areas. Rather than leaning over the back fence to chat with your neighbour, you are now much more likely to hear them crashing against your bedroom wall or gifting you the pitter patter of little feet across the ceiling.
A recent survey of strata in Australia found there are almost 2.6 million strata lots and 2.2 million apartment dwellers, out of a population of nearly 24 million. In 2015, according to the Australian Bureau of Statistics, we began building more attached than detached properties for the first time.
The chances are, many property purchases of the future will be strata. Why not do it smarter?
Know the neighbourhood
The location, location, location mantra applies to strata as much as other property. Think proximity to transport and schools and other local amenities. While you may plan to live in your new buy, there is an increased chance you may need to upgrade or turn it into a rental at a not-too-much-later date and you will want to ensure the capital growth potential, rental yield and potential tenants are what you are after. Also, consider who your neighbours will be. What is the proportion of owner-occupiers to tenants in the property? Is it close to a university or crammed full of loud, partying students? Your neighbours will be a lot closer, so best to get to know them before you buy.
Count the cost
Strata properties involve ongoing costs in the form of strata levies, so it is best to budget for them before you buy. Designed to cover the upkeep of common property and essentials like strata insurance, strata fees vary considerably depending on the age and type of property you are buying, even in the same area. For example, properties with facilities like lifts and pools may set you back more than older properties where you need to take the stairs. Balance these costs with the appetite for investing in regular property upkeep – deteriorating or dirty common areas are a sign strata levies are falling behind, and this may not be an ideal for living, or a future sale.
Known the rules
What do your strata bylaws say about what you can and can’t do once you move in? Many strata properties have prescriptive rules that prohibit certain activities or improvements. Do you like pets? Check if you’re strata rules let you own something bigger than a goldfish. Want to dry your clothes on that lovely sunny balcony? Think again if your bylaws require you to hand your undies next to someone else’s. Keen to stand out by hanging blinds that suit your unique taste? I just hope your strata has not decided you need to hang blinds the same very plain colour as everyone else’s.
Read the report
The strata report will be one of the most important documents you will encounter when buying a strata property. Take your time and read it – carefully. In its many revealing pages, you will find key details of the strata property you are investing in like the strata levies, minutes of recent strata meetings and AGMs, as well as the details of any serious red flags that would make you turn and run as fast as you can. For example, watch out for special levies on lot owners for the repair of serious building defects, or a sinking fund that looks more ‘sunk’ than afloat. While a good conveyancer should point out problems, don’t rely on their enthusiasm. Read it yourself!
Settle in, but stay serious
Strata living is a community endeavour, as much as it is about living between your four walls. The fortunes of your property will be governed by a strata committee and the community of owners (sometimes investors), and it will be the decisions of that committee that will determine both your happiness, and the fortunes of your lot. So, stay serious. For instance, how willing is your strata committee to keep common area of your property refreshed? Also, keep in mind the strata insurance you pay for in your strata levies won’t cover your home’s contents – you will need a good contents insurance policy to ensure you are covered in the event dreams turn to disaster.
What are you waiting for?
Strata living is the reality for an increasing number of Australians, make sure your property manager knows that each new tenant must legally be presented with a full copy of the strata bi-laws before they move in. A happy tenant makes a successful tenancy and reduces vacancy. Remember it’s all about the numbers and you want to make sure that investment property is working for you.
Thank you to Zippy Finance for their content contribution.
