Did you know that in Australia's largest cities, more apartments are built each year than houses? This makes sense when we look at growth trends over the past 20 years, and means that investing in units and apartments is a smart decision for those looking to enter the property game. Being successful with your property investment in these kinds of dwellings requires an understanding of what owning a strata property entails, so we've outlined four key things below.
1. Are there more owners or investors?
The owners of strata units are called a body corporate which means they are the people responsible for the collective management and maintenance of the common areas and facilities of the building. Though its not a hard and fast rule, its generally better if your apartment block has more owner-occupiers rather than investors, as they're more likely to be proactive about maintenance and management of the building. Secondly, it is more ideal to buy into a smaller complex where there are fewer owners to deal with when making decisions with the body corporate.
2. Know what you're getting into
Even if you're buying the apartment as an investment and won't be living there, it is crucial to do your digging through the books of the body corporate. This will give you an understanding of its current finances and recurring issues; you may uncover expenses you weren't previously aware of or any potential legal battles between neighbours...you never know! So do the research and look at the financials.
3. Check the repair history
Just as you need to check out the financials, you need to check the repair history of the building for ongoing problems or things that may arise. There may be problems that are costly to fix and you need to be prepared for these expenses. By law, sellers must disclose material facts about a property, but its still important to look beneath the surface. You can do this by looking at the committee meeting minutes and it could save you thousands.
4. See what maintenance is like
If a property or strata hasn't been maintained over the years, this could cause some big problems for you in the future. Check what the maintenance regime has been like in recent years and what the sinking fund (strata management funds for upkeep, improvement, replacements etc contributed by the owners) is like - do you think its appropriate for the kind of long-term maintenance the building requires? This is another factor that will indicate the expenses you may need to fork out in the long term.
Overall, strata schemes are only as good as the owners within them. Thus its vital you have an understanding of the body corporate before you purchase.