Generally, when compared to buying a house, a unit with a strata property title can often mean lower maintenance and repair costs than a house with land, as these costs are shared by other owners in the block
Strata property can be wise investments, but there are some key considerations to keep in mind.
Consider the following when looking at a strata property for investment:
How much are the strata property levies
These can vary tremendously depending on the development, the management, the number of units sharing the cost, and the level of maintenance and repairs required. These fees can reach $1,500 per quarter or more for a two bedroom unit in inner Sydney. This needs to be factored into the overall cost of the project as an investment.
Whilst larger blocks of units can help to spread and reduce the strata property levies, small blocks of units can be favoured by buyers. Investing in a smaller block of units in a prime investment area – especially in units that are unique or rare – means an increase in scarcity and desirability.
New or old strata property
Older set of units can have added features, such as being more durable and a heavier duty build quality, and be more ‘settled in’ and predictable in terms of the on-going repair costs. New units on average report more defects. On the other hand, investors looking to use depreciation and the tax advantages associated with it, can do better with newer properties. Also, modern floor plans and designs include arguably better use of space, and additional attractive features such as a second bathroom or more convenient integrated technology, such as security or connectivity.
Investors versus owner occupiers
Strata property with a good balance of owner-occupiers increases the likelihood of a building that is better maintained. Owner occupiers tend to care more for their properties than tenants who will often not have a vested interest in the property in the medium to longer term.
Owners Corporation and their by-laws
Every owner’s corporation have their own set of rules around what is allowed or not. Can you rent your unit for short term rentals, can you have a pet, and how visitor parking can be used, are examples of variables that need to be considered within the strata by-laws. It’s important to be clear and comfortable with these rules that should be designed sensibly to suit the various owners of the strata property.
Having a pool, a garage, a gym or an elevator are examples of facilities that add value to a property. It’s important to weigh up the value of these with the extra cost of maintaining and repairing them, as this can be significant.
Strata property inspection report
A proper inspection of the management report will provide tremendous insight into the management approach and style of the owner’s corporation. An investor can also use it to gather insight into the management team into how well organised they are, and how they are using the investment levies of the owners. This report and the balance sheet can provide detail into considerations such as the building insurance in places, as well as illustrating the consistency and fairness of their approach.
Being informed as a professional investor is critical. The better your research, the higher the likelihood of a successful career as a property investor.
Strata property in Australia can be a great opportunity for certain investors – as long as they have considered all of the variables, costs, restrictions and rules
It isn’t difficult or massively time consuming to become a successful property investor. As with any industry, getting the right advice and building the right team is what makes the difference.
Get in touch with us to discuss your next investment. We look forward to providing all the support and tools you need to give you the best possible chance of success.