Before you hone in on the details of the individual apartment you’re considering, it’s a good idea to look at the apartment building as a whole. We recommend keeping the following aspects in mind.
LOCATION, SIZE AND TYPE OF BUILDING
Of course, one of the most important factors in any investment apartment purchase is location. The building should be located within reasonable distance to shops, dining and lifestyle options, as well as things like schools, parks and public transport access. (The latter is particularly important when there is limited car parking available – see below for more on this.)
But location and proximity to amenities aren’t the only things to consider. The size and type of building are also important.
Keep in mind that the more apartments there are in the building, the greater the competition will be if/when you decide to sell. The general consensus when it comes to the building type/size is ‘the smaller the better’; boutique complexes with a maximum of 12–18 apartments are preferable to huge developments with hundreds of units.
STRATA MANAGEMENT AND OWNERS’ CORPORATION
There are different things to consider when buying an investment apartment as opposed to a freestanding house. Perhaps the most important things owners need to understand are the strata management and owners’ corporation for their building.
Apartment buildings with multiple owners are generally strata schemes. A strata scheme involves the division of the building into lots (apartments/units), which individuals own, as well as common property, which is shared by all owners – things like external walls, roofs, stairwells and gardens.
As the owner of an investment apartment in the complex, you’ll be part of the building’s owners’ corporation. All owners share responsibility for maintaining and repairing common property, and together make key decisions affecting the strata scheme. Each owner also has to pay strata levies, which go towards council rates, building and public liability insurance, and water, electricity, repairs and maintenance for common areas. Try to find out what the strata levies are for the building you’re considering, so you can factor it into your finances.
You should also determine whether the building is managed solely by the owners’ corporation or whether a strata manager is in charge of this. Whichever way the complex is managed, be sure to investigate the following questions so you have an idea of what you’re getting into:
- Has the building been well-maintained?
- Is there any history of disputes within the complex?
- What are the strata by-laws and how are they enforced?
TYPES OF OCCUPANTS
It’s worth finding out what types of occupants the building has. Is it mostly owner-occupiers, renters, or a mix of both? A high proportion of renters likely indicates that it’s a popular building and therefore a more sound investment.
Vacancy rates are worth looking into as well. A high vacancy rate within the building should ring alarm bells, but a low vacancy rate can give you some measure of confidence that your investment apartment won’t be too difficult to rent out.
After you’ve assessed the building, it’s time to take a closer look at the apartment itself. The following are some key things to consider.
The size and layout of your investment apartment are important, especially if you’re choosing a smaller option like a one-bedroom unit.
The minimum recommended internal size is generally 50m2 for one-bedroom apartments. Most banks place lending restrictions on mortgages for properties smaller than this. Plus, smaller apartments (especially studios) generally don’t perform as well as larger investment properties due to lower capital growth.
OUTLOOK AND NATURAL LIGHT
Here are a few things to keep in mind when it comes to apartment living:
- A north-facing aspect is best, as this allows the apartment to get the most amount of light throughout the day.
- The higher is generally the better in terms of outlook/views, noise levels and natural light. However, lower-level apartments have their benefits too; they can open up your property to a wider range of tenants who would prefer a more easily accessible apartment, such as elderly people or families with small children,
- What is the view like? Obviously, an apartment overlooking the water or city will be more marketable than one facing a brick wall.
EXTRAS (SUCH AS CAR SPACES)
Extras like off-street parking spaces and balconies might drive up the price of the apartment a little more, but this will be worth it in the long run for the higher rental return you’re able to charge.
Think about the tenant’s options if key extras aren’t present. If there’s no car space, is there public transport nearby? If no balcony, is there a communal outdoor area in the building?
Once you’ve selected an apartment that meets all the most important criteria above, it’s time to seek out an objective rental appraisal. If you’ve reached this stage, our Investment Services team will be ready to assist you! Get in touch online or over the phone to discuss the next steps in your investment journey.