Buying an apartment requires a different approach to purchasing a house – you have an ownership structure to consider, along with strata fees and investment potential.
In today’s fast-paced market, an increasing number of first-time buyers and investors are now tailoring their expectations to encompass apartments.
As house prices accelerate in the current climate, an apartment lifestyle has become more affordable for both young buyers and also those seeking to downsize.
Also, as experienced investors know only too well, the investment potential of an apartment is dictated by location and amenities more than a detached home.
Put simply, apartment living is associated with convenience, not just value.
Of course, the land value component of a house means it achieves greater capital gain than tan apartment. However, if you choose an area where infrastructure, such as a new rail line is being built, you will do well financially when the time comes to sell.
Here are eight essential tips to help you choose the right apartment:
Let’s talk strata – It’s important to highlight the strata scheme and fees that are associated with an apartment. You take a big risk if you fail to conduct due diligence. You should order an independent report to assess the strata committee performance, maintenance issues discussed and the size of the Capital Works Fund.
Building inspection – These are always essential, but never more so than for an apartment. You want to assess not just the state of your unit but the building in general. Once you have bought into an apartment block, you have a shared responsibility for its maintenance. If the Capital Works Fund is low, and maintenance is required, this is a red flag. A strata committee can demand a special levy for owners to meet the cost of maintenance or pay for work to fix an issue.
Inspection tips – When walking through apartments, look at the quality of the building. Are the gutters in good condition, and are the common areas clean and well-maintained? For newer blocks, find out who the developer was, and check out its reputation.
Investment potential – As a general rule, small apartment blocks, say 20 units or fewer, will deliver better capital gain than units in larger buildings.
Prioritise location – Many apartment buyers are motivated by convenience. Therefore, the location of your apartment to amenities such as transport, schools, hospitals and shops is critical to its value.
New infrastructure – The best areas for an apartment purchase are where new infrastructure, such as a rail line or new hospital, is being built. Certainly, your purchase price will have this element factored into it to some degree, but once the project is completed the value will rise even faster.
Local developments – Find out whether there are any planned completions of apartment blocks nearby before your purchase. When a developer finishes a large apartment building, the value of surrounding apartments can suffer for a year or two because of over-supply in the local area. In this scenario, selling and upgrading within three years can be a challenge.
Key features – Parking and storage are essential. Even if you don’t have a car and no need to store possessions, these features are valuable in terms of capital growth and finding buyers when selling.