Considerations when buying an apt as IP

Hi All,

Currently watching the market for an apartment IP.
What are the things I need to consider? I don't mean location, vacancy rates etc more things like strata etc
Where have you been burnt in the past or what lessons have you learned?
Thank you all!

 

We did very well out of apartments with excellent capital gains.

One thing we always did was to ensure we bought one of the “better” apartments in the complex. By better I mean one with the good views, quieter, bigger or better located. Never buy the “worst” on the grounds it is cheaper than others of the same size.

This meant that if a couple of apartments were available for rent at the same time, ours was the best and most desirable. In fact, most of our tenants came from other apartments in the same complex.
Marg

 

haha they did the old sneaky switcheroo hey! Agree with all of your points. I am focusing on ground floor apts wirth a private outdsoor space as to me this is a HUGE pro. If I was ever to move into an apt myself it would have to have a private outdoor space. Have seen some that are also pet friendly which again in Sydney would IMO mean I am never free of tenants. When I lived in Sydney pet friendly rentals were so hard to find.

 

not as experienced as others, my 2c
- if its old building, have they done a fire audit yet and completed the additional works needed
- if you're likely to reno, see if other surrounding units have done something already (eg. if you want to knock down a wall at some stage, see if the unit above has already removed that wall. Also gives some indication on how renos requests are generally seen - like floorboards or not etc)
- lifts, how big, how many (older tennants or ones with small kids prefer minimal stairs, ease of moving stuff and reno). Don't be the apartment next to lifts, it can be loud
- that bad cladding ?

 

Fire audit, great tip literally ahd no idea this was a thing.
Also good point on the reno aspect, I suppose would have to rely on available images on the net to see internals of other apts in the block
Unlikely to buy in a block with lifts as focussing on complexes of max 12 units and only 2 stories
Bad cladding? Which type are you referring to? I am looking at brick only
Thank you for your great advice

 

A few things to look for if it is purely for investment:

- preferably no lifts. But if there is a lift, make sure there are two lifts, not one. No one looks out for this, but if the lifts break or need replacing, you'll thank me.
- no pools
- Layout is key. Apartments are small, so the layout is more important than a house, because there is less flexiblity. So try to keep the bedrooms physically separate from the living areas.
- Make sure it has an internal laundry.
- Make sure it is over 50 sqm (so the bank will feel comfortable funding it).
- Only buy ground floor in a good area, or if it is well secured. Ground floor is a security risk.
- Only buy top floor if it is a two storey walk up, not a three storey walk up. If the apartment has a lift , then top floor is fine.
- And the only other thing, is keep it small and boutique. You are trying to maximise your land/asset ratio. So no high rise.
- Further to this, the boutique blocks have reasonable size strata and body corporates. So they can make decisions. I have seen strata meetings for high rises - in the basement, with 100 people.

 

At present be very wary of some major issues.

1. Oversupply
2. Quality. Recent (NSW, Vic etc) Govt reviews are finding some appalling issues eg cladding. There is a secret list of these properties they wont release to avoid values falling. In meantime lives are at risk and you could buy one and get a $25K levies bill next week. Then lets mention the Opal tower.....
3. OTP problems. Some are facing buyers who are defaulting. This may worsen the oversupply and force sales at lesser values
4. Lenders valuations on the tight side.

But there are some great properties and bargains out there to be found. Fewer buyers is a opportunity. Maybe. Buy quality above affordable.

These issues are more prevalent with large density areas and sites. But in some areas it also flows into townhouses etc in proximity to higher density areas.

 

What about an apartment right next to the front entrance? It's in a 2 storey building (~20 units) and is on ground floor, great location, private courtyard with street front access, car port, but tiny bathroom (shower is very small and crammed). About 20+ groups in the first open inspection.
I haven't lived next to a main entrance but I'd imagine it'd be just as bad as being next to a lift.

 

No thanks! That's why, among other reasons of security, views and breezes, that tenants like to be on the top floor - no passing foot traffic, front doors propped open with telephone books by REA's doing Open Homes on Saturdays etc.

 

A lot of good information above there. I would probably consider an apartment in a block of no more than 8 as for uniqueness in the longer term. High (or even medium) rises can not only be "sausage factories" but the political side on the BC can also be a nightmare.

I would also do some research for what is in demand in the area(s) you're looking. Saying "what I would want" is natural, but it doesn't necessarily mean it's what people want in the area you're looking. A few phone calls to sales and rental agents can paint a good picture pretty quickly.

- Andrew