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Good Apartments—How to find them, what are strata title, body corporate, the right multi-unit block and multi-storey developments? Note the different business interests affecting the yield of an investment apartment.

 

Investing in Apartments

Multi-Unit Blocks, Body  Corporate and Strata Title

Apartments and multi-unit blocks

 

Trends show apartments close to amenities, jobs and public hubs are attractive for singles and couples without children. Even so, social and demographic changes bring new demands for apartments and multi-unit blocks. Those shifts open new markets also for investors. However investments in apartments have limitations because of finance restrictions, lack of controls over costs and management and low capital growth. You possibly know that building management and body corporate are two major considerations when looking to buy a unit title property.

 

When interested in apartments, read on as the due diligence process is complex for multi-unit properties. In a stand-alone house the owner is in charge, liable and in control – not so for shared land, shared ownership and shared buildings with apartments and units. 

 

Firstly find out the type of ownership title that is attached to the townhouse, unit or apartment. As illustrated here, be aware of differences between ownership-share, cross-lease and unit title properties. Understand what is owned by the apartment owner, the body corporate and which areas are shared property. For instance in unit title properties the common areas in a building are owned and regulated by the body corporate.

 

Secondly watch the size of high-rise blocks and developments. Problems grow with the number of units and body corporate’s ability to resolve them. Check the body corporate meeting records and steer clear of buildings with management problems keeping the building maintained and free of disturbances, vandalism, noise, etc. An ill managed body corporate is an investor’s yield killer.

 

 

Good Apartments—How to find them?

 

A good apartment for you has three important features; it meets your needs or purpose, is attached to a sound building and managed well by a responsive body corporate. If you own an apartment in a leaking building or the body corporate does not do its job, you might be  already screwed and sentenced to pay for the consequences. Become a knowledgeable decision maker for getting value for money. It is not a guarantee for plain sailing, but believe me, we own units, apartments, townhouses on cross-lease or unit title and enjoy them as good yield properties. Three considerations and how to find them?

 

 

What type of renter is your focus?

 

Professionals, singles, couples, families—all sorts of renters have different needs. What services do you have in mind to offer like furnished short-term accommodation or unfurnished long-term tenancies? Well, the location affects expenses for parking, public transport, travel time for commuters and so directly the type of renters you can expect. Similar considerations have owner-occupiers, but they might avoid apartment buildings, which are less attractive as permanent home. Those apartment blocks are rather large, the units  smaller in size and the majority owned by investors.

 

The type of renters will affect investor/landlord’s workload and directly the yield. Just compare a furnished studio apartment with a high tenant turnover e.g. a student accommodation with a furnished accommodation for travelers, contract workers or singles in transition between relationships.

 

Compare long-term rental apartments for matured singles, professional couples or city dwellers and you will find building designs that become good investments in accordance with your investment rules.

 

 

Body Corporate, Unit Titles Act 2010 and Strata Title

A Strata Title (stratum title) is a registered ownership of space in multi-unit building, like blocks of units or apartments. The Unit Titles Act (UTA) governs the rules determining activities around apartments where the body corporate owns the building and apartment owners share the common property.

 

Third party hot water billing systems, increasing compliance costs introduced with the UTA 2010 and Body Corp management have been pushing up expenses in recent years.  Ill managed Body Corporates, poor building management and high fees are likely to make it or break it. 

 

 

Strata Title apartments and developments

 

When investing in shared properties you need to be certain about the title (unit title, cross-lease or company ownership).  The type of the title impacts capital growth, yield and price. For instance buying a lease-hold apartment at bargain price might be due soon for an upcoming lease renewal with unpredictable lease-holding costs.

 

Do your investment rules permit  buying new apartments off the plan  or in big apartment complexes? Note, the  market price at settlement date will differ from set selling price that includes developer’s and promoter’s margins.

 

It is common for meeting developers’ margin  to install cheaper bulk ordered appliances  with reduced warranty. We had to replace a kitchen appliance that stopped working after 7 months only to find out that the supplier warranty was already expired and the brand not serviced in NZ.  The due diligence process for apartments is more complex, check out.

 

 

Note, it is the specific of Strata Title properties that so many different business interests may affect the output (yield) of an apartment  like investor’s letting agent, body corporate managing agent, building manager, engaged trades people and everybody who works for profit in his own business. That makes the due diligence on strata title properties and their management so complex. Good luck.

 

 

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