Buying a strata titled property is rising in the popularity stakes around the country, and it seems there are a few stand out reasons why this may be the case.
Strata properties can be very convenient for owners who simply don’t have the time to dedicate to maintaining a large property; perfect for high-flying corporates, shift workers, or singles for example. Often, strata schemes can be an affordable choice for those who are looking to break into the property market too. Strata property is also a popular choice for older investors who want to downgrade from a free-standing house and move into a community environment.
Interestingly, our research shows that New South Wales has the highest percentage of apartment-dwellers, with 22 percent of ‘blues’ living in community-style residences. Unlike a typical State of Origin battle, Queensland sits second in the country with 17 percent of ‘maroons’ heading into strata property living arrangements.
However, before you throw your hat into the ring and gear up for a strata property investment, there are a few important things to set straight.
What is a strata title property?
A strata scheme is made up of a group of buildings, or a building, that is sectioned into ‘lots’. These lots are defined as the individual units, duplexes, townhouses, etc. Schemes can be as few as two lots per title, or have a multitude of lots like a sky-scraping unit tower.
When you purchase a lot, you own the individual air space of the residence as well as a share in the ownership of common property and contents, as defined on the title. This can include items such as landscaping, general gardening and associated equipment, pools, lifts or staircases, car parking areas, and other certain fittings or improvements that form part of the building, including underground services. As the ownership is shared, so are the costs to maintain these areas.
The strata scheme is governed by an executive committee who are elected in from the owners corporation (all of the owners within the strata scheme). The committee makes most of the decisions on behalf of the owners. Some larger sites may also hire a strata property manager or strata firm to head up the executive committee and oversee all that is happening.
Reviewing the strata property scheme.
Before you sign anything, take the time to check over the records of the body corporate. This will offer some comprehension into the financial situation, previous minutes of the executive meetings, and the correspondence of the body corporate. By doing so, you will gain an insight into exactly where you are putting your money and any pending issues impacting the title.
Make sure you are across exactly what it is that you own outright within your title. Is the undercover section in front your unit common or lot-related? Are you responsible for the full maintenance of your car parking area, or is that common?
Consider carefully the financial responsibilities you are facing over and above purchasing the property. Evaluate the balance of the sinking fund (capital expenses like painting), administration fund (day-to-day costs like grounds maintenance), and these continuing contributions you need to make if you become part of the strata scheme. The funds are generally estimated on a year by year basis. If funds within these accounts dwindle, it usually becomes the responsibility of the owners to make up the shortfall of any required outlay.
You might want to consider arranging a professional strata report to check the entire history of the strata property scheme for you. A strata specialist investigator or a conveyancer can arrange these reports. The reports cover items such as financial status, past and pending works or defect plan of actions, current strata levies, insurance, by-laws, and dispute or legal action history.
If you select the right strata property to invest into by doing your research first, you can generally have a pleasant experience and long-term success of living within a community arrangement. However, select wrong, and it could be more headache than it is worth.