In years gone by it was common for first-time home owners, in fact all home owners, to buy or invest in a house in the suburbs.
A lot has changed since then, and more and more people are choosing to live in, or invest in, units and townhouses. This change has come because of, more often than not, their affordability, their superior positions closer to the city, as well as less time required for upkeep and maintenance.
But if you’re considering buying a strata unit, there are some important areas that you should understand before signing on the dotted line.
Buying a strata unit can be a profitable investment and/or lifestyle choice. We say CAN BE because it’s not always a sure thing. The profitability of your investment will largely depend on your ability to pick the right strata unit that will bring you a huge return, and if you choose to live in the unit, the enjoyment element can be compromised by the building’s regulations.
So how do you ensure you chose in the right strata unit?
1. Pick a strata with the best location
From an investment point of view, a great location will easily bring in potential tenants who are willing to pay good money just to be in a convenient location. Among the lifestyle features you need to keep an eye on are those close to public transportation, schools, shops and cafes.
While it is important that these factors are considered and play an important role in deciding whether the location is right for you, avoid choosing those that are located right on the main road and opt for those on a quiet street or at the back of a building complex.
2. Research the strata community
After you’ve decided on the perfect location, investigate the strata communities belonging to that area. As a strata is a shared community, research the body corporate management or owners’ corporation, strata manager and the by-laws.
When you buy into a strata complex, you (and your tenant, as the case may be) will be part of this community and need to deal with these people and abide by their policies.
Find out about the mix of owner occupiers and investors within the strata. A strata with more than 50% owner occupiers is considered as a good mix. Another important area to look at are any signs of disharmony or disputes within the owners’ corporation.
3. Take a close look at the strata plan and contract inclusions
The strata plan will show you all the units, shared property, as well as the property boundaries. It will also show you what other items are included if you buy into the strata, like a car bay for example. It’s important to take a look at the strata plan to know what is and is not included in the ownership so you know what you are getting into.
When the deal moves further along, you also need to check that the list of inclusions in the contract is accurate and complete. Under law, a fixture is something that’s so attached to the land that it is intended to remain there permanently.
If you’re in doubt whether a particular item is a fixture, it’s best to mark it as an inclusion or mention it by name in the contract.
Fittings such as cupboards, floor coverings and the kitchen stove may belong to you as the new owner, but they will need to be itemised as ‘inclusions’ in the contract.
If you are buying off the plan, you should research the builder and the developer:
- Use the Fair Trading licence check to see if they have the appropriate licence and whether they have had a disciplinary action taken against them.
- Look at their website to see what other developments they have been involved with.
- Go out and look at those other developments and if you can, talk to an owner occupier to see if they have had any building related issues.
Studies have found that approximately 80% of new buildings have defects. As a potential purchaser, you should be aware of this and be investigating what the builder has previously undertaken to remedy building defects. Have they previously gone back to the site to repair the defects or have they been dragged kicking and screaming to the site to face their obligations?
This research unfortunately won’t protect you against building defects, but at least you will know what the developer and builder’s approach to defects is more than likely to be.
4. Pay special attention to the maintenance plan
When buying into a strata complex, aside from finding out the levy that the unit owner must regularly pay for maintenance, you also need to know the strata committee’s plan on how to spend this money. Having a committee which makes competent and reliable decisions can make an enormous difference to the wallets of unit owners, and it is important to ensure the committee is keeping thorough and up-to-date records of where and how they are spending funds.
Ensure there are enough financial reserves for regular maintenance and necessary improvements, as well as for any future plans. If you find that the strata committee lacks the financial capability or worse, they don’t have the capacity to plan ahead, consider this as a bad sign.
To make the most of your strata investment, you need to take necessary steps before you actually buy a strata unit. One of the best ways to do this is to invest in a Strata Title Report. The cost of a strata report is nominal compared to the headaches and money it can save you.
Besafe Property Inspections’ highly detailed yet easy to understand Strata Title Reports will help provide you with the information you need before making a purchasing decision.