Apartments: Smart Investment or Compact Compromise?

We've had more and more clients asking about the pros and cons of buying an apartment vs. sacrificing location for affordability in an out of area townhouse or home. 
Apartment living can be a more affordable first rung on the ladder for savvy first home buyers or first time investors and the returns aren't only in equity, but lifestyle and location. So here our are our Top 8 Questions to ask before you buy.

1. What are the ownership costs?

These include council rates, water rates and owner’s corporation (formally Body Corporate) fees.  All this information should be included in the Section 32, make sure you understand it and it is clear what the fees are. You'll also want to get a copy of the owner's corporation minutes going back as far as you can.  This will let you find out if there are any outstanding legal issues or capital works that might be upcoming, which could be an early warning sign of trouble ahead.  A recent purchase we made for a client revealed during our due diligence that there was about to be a Special Levy struck against the apartment (and all the apartments in the building). It was not yet noted in the OC minutes, it took numerous phone calls and questions to discover the issue. Armed with the knowledge we had, we were able to write an offer, for less that we’d origianally planned to, taking into account the upcoming levy. The owner accepted out offer, even offering a further reduction for a quick close. Win. Win. Another we take a hard look at are the recent sales in the targeted building. We have access to data that shows what the property has historically traded for. If we see it sold for $680,000 off the plan in 2020, $620,000 5 years later and $670,000 last year, it’s an indication that your capital growth is unlikely to follow wider trends.

2. Who is the developer and builder?

It's imperative to do your research! Don't be lured in by pretty images without substance, especially if you're buying off the plan. If the deal sounds too good to be true, it's probably exactly that. Too good to be true. You need to look at the record of the developer and whether they deliver. You should also ask the same question about the builder. Who are they and do they deliver on time? Some fail miserably with their delivery times. 

Looking at past projects is one way to find out about the developer’s history. Search Facebook groups, look for Google reviews are good places to start. Ask the builder for some referrals, past clients are the best source of information.

3. What’s the parking situation?

With the proliferation of developments like Nightingale, We take out things like second bathrooms, individual laundries and individual car parking to reduce the cost of construction and ongoing maintenance - great in theory but it does put a greater strain on the surrounds with residents and visitors all looking for parking. If you have a car, you are going to need somewhere to keep it. Inner city car spaces come at a premium.  It will also affect your car insurance, if you're parking on the street.  Be aware if you don’t get a space then you do not automatically get the right to a council car-parking permit.  This information is not always readily disclosed. 

4. What's happening nearby?

The building is gorgeous, but what’s happening nearby? Are there other developments proposed for the area? Find out if you may suffer from a loss of views or amenities.  Any new works may also involve road closures, and daily construction noise so you need to get an understanding of what the effects of any developments will be. A great deal of our due diligence involves understanding and accessing information about nearby plans and permits.

5. What are the vacancy rates?

Vacancy rates are interesting whether you are buying as an owner-occupier or investor. If buying as an owner-occupier, it will affect your capital gain if vacancy rates are high. It’s not always easy to get vacancy rate information, but it’s worth pursuing.

6. How close is it to public transport and other amenities?

Access to public transport is important for unit owners, as residents are unlikely to have multiple car-park spaces. What is the walkability of your potential new home?

The old real estate adage, Location, Location Location! is not just a trope.  You can buy the right home in the wrong location. You can change the structure, remodel it or alter the home's layout but, typically, you cannot move it, as it's attached to the land.

7. What is the quality of the internal fittings and fixtures?

We’re getting down to the nitty gritty here. Look at everything, not just the big ticket items like ovens and cooktops. What’s in the wardrobe fittings - is it fitted out or just a rail and a shelf?  Door handles on doors and cupboards. What about the tapware and vitreous bathroom ware? The devil is in the details.

8. Is the building available for Airbnb?

This is a question that wasn’t even on the table a few short years ago. What about Airbnb? If you’re an investor, you should know some owners corporations forbid short term leasing. Look at the whole building, if many units are being bought for Airbnb then you want to have this situation clarified before you buy. If you’re an investor it may not worry you, but if you’re an owner-occupier a building full of short term lease homes can affect your concept of safety, quiet enjoyment and use of amenities.

What’s the best tip you’ve been given during your house hunt?