As an investment, strata properties have many advantages and disadvantages over typical houses that are freestanding. But are they a solid investment? The definition of a strata property is that, generally, you own a part of a larger complex or dwelling. If you will, it’s like dividing a share of land but vertically rather than allocating plots of land. Strata titled properties are in blocks of two or more, and can go up to hundreds of units. As they are part of a block, they’re not freestanding like houses would be because they share walls, ceilings, floors, etc.
There are many distinct advantages and disadvantages with these types of investments, and while every investment is a gamble of sorts, it is down to you if you decide to venture into this. Some people have found benefits from strata properties, while others have not. Firstly, you need to see if your budget is up to the task, and so you need to crunch the numbers based on your specific risk profile and financial situation.
Looking at the positives first:
- When you factor in the cost of the property relating to the land, it’s much cheaper than buying a standalone house.
- As the price is usually less than houses, there tends to be sufficient demand, which will generate a growth of capital for you in the coming years.
- The upkeep of the property is sorted by the strata levies, and these are typically paid on a quarterly basis.
- The chances of a loan from a bank are quite high. There is up to a 95% loan to value ratio depending on the suburb.
As with any upsides to these types of investments, there are always downsides to these of course:
- The levies can be high, but there are ways around this. You can use an independent company like Abacus Strata to undertake a review of the strata community finances. If you don’t know how your levies are being paid, it can look like a bit of a blind investment. The cost of levies depends on the amenities of the building, such as if there’s a swimming pool, a gym, or even elevators.
- The unit can potentially lose value in large apartment blocks, because if a neighbor has to sell up very quickly, for example, due to divorce or a financial difficulty.
- Strata apartment blocks have the typical issues associated with apartment blocks, such as noisy tenants and, as the proximity to your neighbors is very close, relationships can be fraught.
Stratas are a very popular choice of investment for many people that are looking for a small share of land in an area that is more urban. If you are a professional and you’re looking for a place that is a way to earn a decent amount of money but you don’t have a lot of finances, or even the time to spend on being a landlord of a residential property, this is a very viable option. Always be sure to do your research first.