Buying a strata-titled investment property

Buying a strata-titled investment property

Table of Contents

Strata-titled developments have come a long way with properties now offering an enriching social and community environment. But there are some significant differences in how you buy and sell strata-based properties that you should be aware of before jumping in.

Where to invest

Industry body the Real Estate Institute of Australia (REIA) says that if you are buying your apartment or townhouse as an investment, it is desirable to buy into an area cheaply and reap the benefits of increases in property prices.

Although not set in stone, there are certain indications that a suburb might grow and the REIA recommends asking yourself some of the following questions to gauge an area’s potential.

  • Does demand, for whatever reason, exceed or apparently exceed supply?
  • Is the area’s increase in price significantly greater than the region as a whole?
  • Does the area have low prices, which are expected to rise in the near future?
  • Are neighbouring areas experiencing good capital growth?
  • Are there positive developments happening in the area (e.g. a new railway or arterial road to the city that will impact positively on capital gains?)

Understanding strata arrangements

A strata scheme is a building or collection of buildings divided into ‘lots’. These might be individual units, townhouses or houses. The NSW Department of Fair Trading says that when a person buys a lot, they own the individual lot and share the ownership of common property with other lot owners, such as gardens, external walls, roofs, driveways and stairwells.

“One major difference between owning a house and a unit in a strata scheme (or ‘lot’) is that the external walls, the floor and roof do not usually belong to the lot owner. These areas are usually common property. This means that the maintenance and repair of these parts of the building are the responsibility of the owner’s corporation.

“As it is common property, the lot owner cannot alter or renovate these areas without permission from the owners’ corporation. Lot owners may need permission to do things such as install services (eg. cable television, phone or internet), knock down walls or replace locks on doors or windows.”

Buyer Beware

REIA president Malcolm Gunning says that before making a purchase, potential buyers should investigate any strata laws to see what conditions there are within the property as well as any outstanding levies.

Knowing if there are any maintenance or renovation plans is a key step as well as any structural issues/damage and upcoming special levies.

“It might be an older block that has a levy that’s going to be put in place to change the window frames or upgrade to the fire standards or even with cladding [which is an issue] at the moment. That needs to be looked at and understood,” Gunning explains.

Another cost to consider are strata levies. “Strata levies are expensive. If you live in a block of apartments and the apartment block has a concierge or a gymnasium, all those things have to be paid for with a strata levy. Your strata levy can be anything from a $1000 a quarter to $3500 per quarter. That’s not going to go away. That’s infinite.”

The NSW Department of Fair Trading also recommends that before buying into a strata scheme, you should be clear on the common property boundaries.

“For a definitive answer on the common property, refer to the strata plan for your individual strata scheme from NSW Land Registry Services.”

Before signing a contract

You will need to seek professional advice before buying a strata unit due to the complexities, which include inspecting records.

“There are companies that specialise in inspecting the records and your solicitor can arrange this for you. You can also inspect the records yourself. The owner’s corporation must make their records available following payment of the necessary fees which is usually done through the strata manager, the NSW Department of Fair Trading explains.

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The information provided is a general guide only and is not intended as a substitute for legal advice. The company disclaims all responsibility and liability for any expenses, losses, damages, and costs which might be incurred as a result of the information provided by the company.

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