One of the most challenging things about buying an apartment is searching for the ideal property that combines position and potential with scope to add value. Before you set out, make sure you know exactly how much you can afford to spend as this will give you a solid framework to build your search around. It also eliminates any chance of disappointment, if you find a dream property that’s way over your budget.
Aside from budget, the other question that you will be faced with almost immediately is whether to go older style or contemporary. The apartment market will deliver you numerous alluring possibilities of period style apartments with original features AND sleek modern apartments with all the luxurious conveniences we’ve come to depend on in the modern age. Your job is to try not to be romanced by the lure of charm and nostalgia, or seduced by rooftop pools and shiny surfaces. Careless buyers will let lifestyle choices cloud their judgement and may end up with something aesthetically pleasing but of questionable investment potential.
The Pros and Cons
So how do you decide? Well there are of course pros and cons with buying an established older-style apartment or buying an apartment off the plan. Your decision will gravitate to how much you want to spend and in what way – you could snap up a bargain with a run-down renovator’s delight and make a great return, having invested your extra cash into restoring it to its former glory. Or, you could put all of your money into an off-the-plan apartment; avoiding the headaches of renovating and giving yourself time to enjoy longer-term growth as the area develops and local property values improve.
Personal values and taste will come into your decision, with many people not wanting a ‘2nd hand home’, while others baulk at the lack of character and personality in some modern developments. There is, however, a reasonably clear distinction that can be made between ‘old’ and ’new’ and it’s not just about style. Title legislation has changed with apartments over the decades and the title your property is under can severely restrict your capacity to borrow as well as your plans for its future.
Prior to the 1960s, most apartments existed under Company Title, giving owners allocated share parcels rather than the higher form of ownership associated with today’s Strata and Community Titles. What does that mean to you? As a rule, banks won’t lend as much for the purchase of a Company Title property, which means you’ll need more cash up front to buy it – as well as more cash afterwards to repair and renovate it. A really important consideration also is that many Company Title buildings do not allow for the property to be rented, or insist on the Board of Directors approving both owners (post purchase) and tenants (where renting is allowed), which can cause real issues if you didn’t plan to live in your investment property yourself. Most apartments in Australia have converted to Strata Title since the 1960’s, so this is not an issue for them, however it’s definitely important to know, as you dream apartment may just become your financial nightmare if you have misunderstood the Title System. It is not beyond the realms of possibility for the buyer of a Company Title property to be declined by the building’s Board of Directors when interviewed post-purchase, even though they were the successful bidder at auction and have exchanged contracts – in the belief their purchase has been secured. You can imagine the grief this causes for both the seller and the buyer, however, fortunately such circumstances are very rare indeed.
Everything Old is New Again
Older apartments are definitely worth considering for those with a passion for a project. Richly detailed high ceilings, stunning timber floors and spacious light filled rooms with period features are immediately enticing, even amidst years of neglect and disrepair. Properties like these offer great renovation potential and significant opportunity for financial gain. The worst apartment in the best street is often just a renovation away from the lucrative pot of gold after all.
Similarly, classic apartment blocks of the 1960s and ‘70s offer small communities of tenants, sometimes with only 6 – 10 units in the block and good, spacious configuration options. A common style of the time was to have separate kitchens and living rooms, so many of these properties offer great scope for medium scale renovations. Converting a pokey 4 room apartment into a modern open plan version of its former self can project a property into a whole new price category, with a silver bullet.
Older style apartments do not come without warnings though, so do your research. Try to learn whatever you can about the current ownership of other apartments in the block. If most of the residents have been there since the property was built you may have some trouble being the only force for change in a cash poor glorified retirement village. If you have plans to knock out walls, get an engineer or architect’s advice concerning the structural elements, maintenance needs, fire rating compliance status, condition of power and water infrastructure, and the detail about shared facilities like car parks, garden areas and laundries.
Lifestyles of the Rich and Famous
Affluence has become contagious and in the Instagram age, there are many lusting for a higher end lifestyle. With the right amount of cash behind you, you too could be drinking champagne on your rooftop terrace, living a push button life with all the modern conveniences like secure parking, concierges and in-house gyms at your fingertips.
Many of these conveniences come with hidden costs however and in the haste to make a quick development buck, often quality is overlooked. Be sure you check fittings, fixtures and appliance brands before being dazzled by all the perceived mod cons. Understanding the maintenance and upkeep of ‘the perks’ is important too. A gym is only useful if its clean and everything works – same applies to the pool, the bbqs, the cinema and the lifts. It’s also wise to look carefully at the Strata Management contracts that may be in place with new developments. Stories of apartment owners being stitched into unsatisfactory decade-long contracts with underperforming Strata Managers and excessive charges are not unheard of.
The upside, of course, is that if attention has been paid to the detail, you’ll get a shiny new apartment, where everything works and the best imaginable lifestyle can begin as soon as you move in. There are financial advantages to buying off-the-plan versus an established apartment too. An off-the-plan purchase means you can put a deposit down now and not have to pay the balance until the property is built. This gives you a chunk of time to earn capital gains, on a rising market, while the development is being completed. By the time you move in, you may well have already made a capital gain of hundreds of thousands of dollars. Some buyers make a career out of buying and ‘flipping’ properties prior to settlement, but this can be very risky and should not be undertaken light heartedly.
So, as always, do your research. Get the basics in our Home Buyers Guide and buy with your head not your heart.