Apartments can be a great investment when it comes to affordability and maintenance.
Like any investment its imperative you do your research before purchasing an apartment.
Inner city and “off the plan” apartments can seem appealing when looking at affordability, design, depreciation and location. The problem in certain markets across Australia is a large influx of stock hitting the market over the next couple of years.
Below we have provided 14 tips to help you invest in the right apartment. Before buying an apartment it’s important to make sure you do the following research:
Look for apartments within 15kms of the nearest major (preferably capital) city.
Don’t buy on main roads, or directly opposite train lines.
It’s important to ensure the apartment block has plenty of parking for tenants / owners as well as extra parking for guests. A lock up garage is definitely desirable.
Whether you looking at a one, two or three bedroom apartment always check the floor plan and size before you buy…the floor plan should be provided by the real estate agent.
It’s important to shy away from purchases under 50m2 and look for properties over 80m2.
Ask yourself; is the apartment within walking distance of local amenities? It’s important to buy in areas that are close to local shopping centers, the beach, public transport, and local parks.
Is the apartment easily accessible?
If you’re buying an apartment in a larger complex, ensure it has lift access. If the apartment does not have lift access, look for something on the lower levels that have fewest stairs.
Put yourselves in your tenants’ shoes and look at the property from their perspective.
Shy away from high-rise complexes.
The sweet spot is to purchase in a complex with between 4 and 40 apartments. Apartments in larger complexes lose their individuality and uniqueness.
Take the time to learn what else is available within a complex.
Analyse the position of the apartment within the complex. Apartments that have side access or corner aspect often are valued higher and have higher capital growth.
- Capital Growth
It’s important to understand if the apartment block has increased in value over the years. How old is the apartment block? How well has the suburb itself been performing, and how well has the complex performed?
Take a moment and decide whether you could manufacture growth into the apartment through renovation.
- Fees / Body Corporate
An affordable apartment can end up costing you a bomb if you don’t factor in the appropriate fees and charges before purchasing your apartment.
Your goal should be to invest in cash flow neutral and positive property. It’s important you do the necessary research and understand the associated holding costs involved with your purchase.
Buying something with low body corporate fees can often be a better option than buying something at a cheaper price.
- Rental Yield
If you want to continue moving forward it’s important to avoid purchases with a rental yield of anything with less than 5%. When purchasing an apartment you’ll want to find something with a rental yield of between 6 and 9%.
This ensures the rental yield covers the cost of mortgage repayments as well as the holding costs (fees) associated with your property.
- Owner Occupied / Vacancy Rate
It’s important to look at what percentage of the complex is owner-occupier and what percentage of the apartments are rented.
It’s also important to note that anything less than about a 70% owner occupied should ring alarm bells.
When there are a high percentage of renters in a complex, it is going to affect vacancy rates, and your ability to rent out your apartment.
It’s important to purchase an apartment in a complex that has a vacancy rate of less than 2%.
- Motivated Seller
When inspecting an apartment it’s always important to understand why the owner is selling the property and how long have they owned it. This will provide you with an indication of where to price your offer and when how motivated the vendor (seller) is.
A number of properties now offer a utilities rebate for tenants (up to a certain amount). It is a really good selling point when it comes to advertising the property and finding tenants.
Having the right property manager for your investment is always important. Some apartment blocks have on site managers. These onsite managers are often more invested in the well being of the complex and work to keep it well maintained.
If there is no on-site manager, it’s vital to shop around for a property manager who offers a professional service at the right price.
The information contained in this article is for general information purposes only and should not be regarded as a substitute for professional legal, financial or real estate advice. The information is provided by Pumped On Property and while we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained in this article for any purpose. Because every persons needs and financial situations are different, the information in this article are intended as a guide only. Any reliance you place on such information is therefore strictly at your own risk.
In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this article or which may be suffered by any recipient through relying on anything contained in or omitted from this article.
Through this article you are able to link to other websites which are not under the control of Pumped On Property. We have no control over the nature, content and availability of those sites. The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.