While most Australians love the idea of buying a home with a yard, the financial reality for most first home buyers – especially those living in Australia’s capital cities – is that they will buy an apartment or townhouse.
Apartments and townhouses are also known as strata properties. They are run by a Body Corporate, which is made up from property owners who live in the complex.
When you decide to invest in strata property, there are five important checks to undertake.
Research the strata corporation
For peace of mind, conduct due-diligence on the strata corporation. This may include;
1. Reviewing the financial records (for at least the previous two years).
2. Checking the ‘sinking fund’. The sinking fund is a pool of funds which the owners contribute to. This fund is set aside for big (costly) maintenance projects. You need to check how much money it contains. You should also check when was last accessed, and what for.
Check the sinking fund
The sinking fund can give you a good indication of the financial prudence of the strata committee. If the building is not new, the sinking fund records can also be a good indicator of whether or not the body corporate has undertaken a thorough and regular building maintenance programme.
3. Reading the minutes of all Body Corporate Committee meetings. These will document what types of issues arise and how readily they are dealt with. If a Strata is poorly managed, it can affect your investment.
Check the fees and assets.
One of the great benefits of living in a strata is that the maintenance is taken care of. However, you need to know what the annual fees are. You also need to factor in these Body Corporate costs when you calculate mortgage repayments, and also allow for possible increases each year.
5. Find out which areas of the building areas are included as ‘common property’ and are therefore looked after by the Body Corporate. On-site pool and gym facilities can add significantly to strata fees.
You can check the strata community website for more information about strata properties and your rights and responsibilities. Be aware that Strata Laws in Australia can differ State by State.
And when you’re ready to buy, contact us.