Unit/Townhouse (strata) vs free-standing house - actual experiences of costs

Discussion in 'Property Management' started by Howler, 13th May, 2020.

Join Australia's most dynamic and respected property investment community
  1. Howler

    Howler Active Member

    Joined:
    9th Jun, 2019
    Posts:
    29
    Location:
    Brisbane
    I see the phrase "Body corp is a rip off" bandied around a lot. However, rather than a debate about which is theoretically better, I am interested to discover more regarding the actual experiences of investors/owners who have held a strata property or a free-standing house (preferably both!).

    Specifically interested in how low body corporate costs (e.g. $500 per quarter) of a unit/townhouse compares to the cost of owning and maintaining a house, in the medium term, e.g. a 5-10 year period.

    I have not been in either situation, so I am also interested in fair comparisons*: where for example, for a unit with a $2000 a year body corp fee, this might have been equaled by a $2000 building insurance on a house.

    * Fair comparisons being, where both the unit/townhouse and house appear to be in good order but repairs & maintenance are unanticipated. As opposed to an unfair comparison, where someone bought a unit/townhouse in poor condition with little sinking fund, or a near condemned house.
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    20,384
    Location:
    Sydney or NSW or Australia
    They are not directly comparable but you need to understand the similarities and differences:

    Strata
    • Levies are compulsory
    • Maintenance is compulsory (can't let the building or asset deteriorate), shared cost
    • Contractors so everything from mowing, gardening, gutters, painting, cleaning etc
    • Building Insurance forms a major part of the levies
    • Council rates are levied on each lot
    • Management is not compulsory (the OC can perform this task If keen)
    • O/C or manager arranges common area maintenance
    • The OC must account for how levies are collected and spent
    • An annual meeting of owners is required
    • The strata manager acts as chairperson
    • Water rates & usage is a shared cost
    Free standing dwelling
    • Maintenance is voluntary
    • Insurance is voluntary
    • Fully liable for council & water rates
    • Water usage can be recouped from tenant
    • You can DIY
    • You don't need a property manager
     
    Ted Varrick and Archaon like this.
  3. Pumpkin

    Pumpkin Well-Known Member

    Joined:
    27th Jun, 2015
    Posts:
    1,058
    Location:
    Brisbane
    It is not easy to compare because a house is never comparable to a Unit. Although they might even be side-by-side but the structure, layout, access, facilities are so different...... One cant really compare a 3-bedroom Apartment with a 3-Bedroom house for instance. Try compare cost of painting for an example.....

    And it's not all about money. There are some non-financial considerations too.....

    I guess it really depends on what type of person you are: If you like gardening and really want a yard for pets/kids, then choose a house.
    But if you dont care about this, and dont mind living in a Complex, get a Strata-title.

    In a well-run Complex, maintenance is planned via Sinking Fund. Hopefully the Committee (and Onsite Manager if there's one) is diligent and look after the place nicely.

    Same applies to a house. Just because you are a single Owner doesnt mean you cannot do your own "Sinking Fund" or management programme.
     
  4. Mark F

    Mark F Well-Known Member

    Joined:
    29th Jan, 2020
    Posts:
    584
    Location:
    Canberra
    Personally I find body corporates a bit of a pain. For the first time my PPOR is a beautifully designed 3/2/2 town house on the corner of a complex - been here about 10 years. What I see is $90-$100 a week being paid out for the things previous posters have listed that I know can be done better/cheaper. There are regular battles to stop rampant waste by the BC on "betterment" projects promoted by various committee members that are bound for certain failure and stopping people having solar pv or hot water because of the aesthetics.
     
    wylie and Stoffo like this.
  5. Michael Mitchell

    Michael Mitchell Property Manager Business Member

    Joined:
    17th Sep, 2018
    Posts:
    764
    Location:
    Brisbane
    The way I look at it is like this:

    1. Strata titled property will be cheaper to buy (generally) than non-strata titled, in this regard, it lets a buyer enter the marker sooner and start being an owner sooner, starts the capital gain equation sooner too etc.

    2. If you add up the levies of a strata titled property for say a 10-15-20 year period, then add that on to the cost of the purchase price, then compare to the non-strata titled property, how do those numbers stack up? you pay less initially but keep paying over time, however as per point above it lets you start in the property game sooner.

    3. If you understand strata law well enough and dealing with bodies corporates, there are some very savvy investors who have been known to pick up extremely cheap run down under valued strata properties, use the strata law to force the body corporate to fund and make/improve the common property and other aspects, then allowing them to sell the property at a premium (because the scheme is better) and have only having paid a fraction of the cost whilst being a lot owner etc.

    4. Many hands make light work - in the event of a major non-insured event, being part of a large scheme is safer in a special levy were to be cast and every one had to chip in, however larger schemes cost more to run in admin and caretaking etc. being involved with smaller schemes such as 6 or less, very simple and cheap administratively to run, but again if a major non-insured event happened - such as plumbing mains due to ground movement in a 3 story and 6 of you had to cough up $30k to have it fixed that's not a good day at the office.

    5. Pros and cons to lifestyle aspects, restrictions, etc.

    6. Horses for courses - think hard about what you want.

    7. From an investor point of view, the strata levies eat up most of your profit and far outweigh (comparatively) the r&m you'd choose to undertake on a free standing property (as you have choice to delay non-essential/non-urgent where's on strata scheme you're obligated to pay levies based on statuatory forecasts etc)
     
    Last edited: 14th May, 2020
    wylie and Tom Rivera like this.
  6. hammer

    hammer Well-Known Member

    Joined:
    26th Jul, 2010
    Posts:
    2,419
    Location:
    Darwin
    Depends on the strata arrangement too.

    A huge complex with a big committee is going to function quite differently than a self-managed block of 4 units where everyone meets up once a year for pizza..
     
    wylie, Angel and Stoffo like this.
  7. Stoffo

    Stoffo Well-Known Member

    Joined:
    14th Jul, 2016
    Posts:
    2,706
    Location:
    Sydney
    You will do a LOT of the works on a PPOR house yourself.

    Even as an IP house, you also have that option, and can source quotes.

    A Body Corporate is a PITA :p
    Firstly there is that one or two that seem to thrive and enjoy being "involved" and complicate EVERYTHING :rolleyes:
    They want something fixed, so quotes are sought, but they want the scope increased/limited, so requoting o_O ..... (this is the best way to get the price doubled).

    There are a bunch of "common area's" like foyers and halls that you wouldn't have in a house, adding to costs for painting, cleaning and maintenance :(

    The garden area's that everyone want's "immaculate" because we "pay for it" but a mere few even use, and the rubbish not only in the gardens, but other common area's, furniture dumped in the garbage room, (people who can't fold up a cardboard box to save their life:mad:) and the cost to put the bins in/out every week all add up, all items that the tenant of a non body corporate actually do at no cost to you as a landlord :D

    Example, less than 12 month old complex, committee decides that to reduce monthly power bill to replace all fluro tubes in two levels of underground carparking to LED, as the cost is $12,000 and exceeds the $10k limit placed on spending (without a AGM/EGM) the committee elects to do level 1 today for $6k, and level 2 tomorrow for $6k leaving the Capital works fund in the red :eek:
    No, it hasn't made any noticeable difference to the power use !!! (Insert cry imogi)
    Am sure his "sparky mate" is still dropping of a carton every week .........
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    20,384
    Location:
    Sydney or NSW or Australia
    IIRC, there are some government incentives available for converting to LEDs. You pay for the install cost not the fittings.

    Why didn't the committee investigate this before pushing the button?

    The savings from fluoro to LED would be minor, what's the payback period in the back of the envelope analysis?
     
  9. Angel

    Angel Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    5,369
    Location:
    Paradise, Brisbane
    I have a different experience to the ones already mentioned.

    We own a large 4/2/2 family home in North Lakes and a small 3/1/1 townhouse very close to the beach in the Redcliffe area.

    In our case, both homes are well presented and well maintained (my husband treats them better than our PPOR) and the strata fee for the TH is minimal. It is a single building with five attached THs and three of the owners live onsite. They treat the property very well, maintaining the property, driveway and garden like typical retired home owners would. Our BC fee is currently $250 each per qtr but will rise this coming year after staying the same for several years. The annual building and landlords insurance for the house at NL is approx $1500 IIRC compared to the $1000 BC fees we have been paying for our unit.

    Council charges almost identical rates for both properties. Last year MBRC introduced a minimum rates charge for units which is the same as we pay for the 212m2 house.

    I remember the good old days when council rates in Moreton Bay were much lower than my parents paid for their family home in Brisbane even with their pensioner discount. My Mum now lives in a 30 year old complex in Everton Park and the fees are quite reasonable. Sorry I dont recall her details. It has a pool and the gardener is there every week, the grounds are immaculate and they are regularly painting something. Her BC fee is more than mine, but not as much as I have seen other people pay in Brisbane. I think it's around $500 and then she pays insurance for her contents.
     
    Howler likes this.
  10. Stoffo

    Stoffo Well-Known Member

    Joined:
    14th Jul, 2016
    Posts:
    2,706
    Location:
    Sydney
    Why did they think that changing fluro's would save bugger all compared to the 4 lifts running in the complex ????
    I was the chair for the first 6 months, but was ousted by this clown because he didn't like me (I negotiated to have 100kw of solar installed free of cost, ours after 4-5 years, but he couldn't believe it or want it).
    Roll with it or save a better deposit and buy free standing :p
    Never again for me :cool:
    Strata might work when you can't afford a free standing ppor, but as an IP :eek:
     
  11. Howler

    Howler Active Member

    Joined:
    9th Jun, 2019
    Posts:
    29
    Location:
    Brisbane
    Thanks Angel, this is the kind of info I was looking for.

    Sounds like a smaller complex with a higher owner occupancy rate might work, if chosen carefully.

    Also the costs seem to be comparable. The strata property is not significantly worse than the freehold, which seems contrary to the common belief.

    If anyone else has some comparisons similar to this, please post them.
     
  12. Tom Rivera

    Tom Rivera Property Manager Business Member

    Joined:
    1st Jul, 2015
    Posts:
    2,142
    Location:
    South East Queensland
    I really like this. In a lot of cases, possibly even the majority, but body corporate costs will exceed your perceived benefit- but not always! ESPECIALLY if you can get an area where the units are noticeably cheaper.

    I was also recently part of an effort to get the body corporate costs down in a complex, one where my client recently purchased. It relieved them about $100q in costs, and we're working to reduce them further (there's a dodgy set up with the complex manager...).
     
    Michael Mitchell likes this.
  13. Ted Varrick

    Ted Varrick Well-Known Member

    Joined:
    21st Jun, 2015
    Posts:
    1,928
    Location:
    No Mans Land
    @Stoffo , the Chair is just a normal Committee member who is able to run the meetings.

    Nominate yourself as the Secretary, and don't worry about the Chair.
     
  14. Shazz@

    [email protected] Well-Known Member

    Joined:
    24th Jun, 2018
    Posts:
    732
    Location:
    NSW
    I’ll give you my perspective as an owner occupier. I currently live in a strata complex, and before that, owned a free standing house.
    For my current property, there is only 4 lots, and we are all owners (~$500 per quarter). I am on the committee and we run a pretty tight ship when it comes to maintenance, works, fees etc., and most of the time, we get our own quotes to compare, not just what the manager has provided. What I really like about being in a strata complex is that maintenance and capital works on the property is done routinely and I don’t feel the expense coming out.
    When I owned a free standing property, there was so much maintenance to consider, but I never got around to doing it because it was coming out of my savings.
    So for me, it was a psychological thing. I haven’t done the maths on which method is more cheaper, but I suspect that if the same amount of maintenance/work was carried out for both properties, it would be very similar.
     
    Specialist Sydney and Tom Rivera like this.
  15. hammer

    hammer Well-Known Member

    Joined:
    26th Jul, 2010
    Posts:
    2,419
    Location:
    Darwin
    Yup. You've pretty much hit the nail on the head.

    Look for complexes with 2-6 seperate units. Make sure there's no pools, lifts or other "extras" .

    I live in a 4 unit setup (2 X duplexes)...the costs are more or less the same as a house but it's in a waaaay better location than any house for the same money.
     
    [email protected] likes this.