Buying an apartment checklist
When buying an apartment as an investment, a handy checklist can help you make sure you've ticked every box, from parking to strata costs to security.
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What to look for when buying an apartment
If you're buying an apartment as an investment property, there are more considerations to account for than just a decent price and a desirable location. A number of other important factors will end up determining whether or not your apartment is a wise investment. The checklist below will help you on your property hunt.
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1. Location
Location will be one the primary factors determining your investment's success. Not only will you want to look for in-demand suburbs, you'll want to look at the location of units within those areas. Potential tenants will be attracted to your apartment if it's located in proximity to public transport links, green space, schools, shopping and cafes, and restaurants.
You'll also want to pay attention to the unit's location in the building. Will it be likely to get sun? Does it face a main road? What level is it on? Typically, higher floors and north- or east-facing aspects away from main roads are most attractive to potential tenants.
2. Size
The size of the unit you purchase will largely determine your target market for tenants. You can end up limiting your market by going either too small or too large. 2-bedroom units tend to have the broadest appeal because they open your market up to both families and flat shares, as well as single professionals.
3. Noise
Checking for noise is important, although it can be tricky to judge. Listen out for noises from neighbours in surrounding apartments, on all sides. And if the building is in a busy area, check if you can hear traffic noise.
4. Amenities
When you're considering the amenities to look for in an apartment purchase, make sure you stick to the amenities that actually provide a return. Features like swimming pools, gyms, tennis courts and the like will add to your strata fees while doing little to attract potential tenants or eventual buyers. Generally, tenants are more attracted to amenities like well-manicured outdoor areas, security features and lift access.
5. Parking
Parking is a huge factor to consider when choosing a unit. This is particularly the case if the unit you're considering is some distance from public transport links.
Off-street parking is obviously a big draw for units, but readily available on-street parking can help make up for the lack of dedicated parking. If the building you're looking at does have off-street parking, you'll also want to consider whether there's available and adequate visitor parking.
6. Strata
Strata is an important aspect of owning a unit. A property on a strata title comes with extra costs and rules associated with sharing the ownership of a larger complex.
Strata fees will have a huge impact on the cash flow from your investment property. Strata fees go toward maintenance and upkeep of the building. If they're too high, you could find the income you receive from rent diminishing quickly.
In addition to the fees, pay attention to the strata rules. Strata rules govern the alterations and additions you can make to your unit, as well as putting some restrictions on its use. Some strata rules can severely limit the flexibility you have as an owner, so make sure the rules for the building you're considering aren't too severe.
Getting a strata report can tell you if the unit and the complex have had any previous issues, such as maintenance or complaints.
7. Security
Security is an essential feature when living in close proximity to numbers of other people. Smaller blocks where people are likely to know their neighbours can get by without quite as many security features, but safety becomes more important in larger buildings. Look for security systems that make the building convenient for residents to access, but stop strangers from walking in.
8. Potential to add value
It's likely that you'll eventually sell your apartment with an eye toward making a capital gain. If this is the case, you'll want to look at units that have the potential to add value. Whether it's minor cosmetic improvements or major structural changes, find a unit that offers you the opportunity to boost your return on investment.
Check out all our home renovation guides here
9. Uniqueness
You'll want the unit you purchase to stand apart from others in the area. Uniqueness may not be the main factor for finding tenants in a high-demand area, but it can become a drawcard when you decide to sell.
Finding distinctive characteristics can be difficult if your unit is one in a block of hundreds. However, adding bespoke features or design elements can help yours rise above its neighbours. You could also consider purchasing a unit in a smaller block.
What are the pitfalls of buying an apartment?
There are few possible risks that come with buying an apartment as an investment. These are the main ones to watch out for:
- It's sometimes harder to get a mortgage. If you're buying a very small unit, some lenders will turn down your application. It's harder to sell very small units, so they're viewed as riskier investments. Some lenders require larger deposits when lending for apartment purchases too.
- Brand-new units can sell at an inflated premium. A newly-built apartment often sells for a premium. In a market with rising prices and high demand, this may not matter much. But if there are many empty apartments in the area and prices are stagnant, you'd probably less for a slightly older but very similar unit.
- The neighbourhood may be oversaturated with similar apartments. Your investment will have less value if multiple new apartment buildings are coming in the same area very soon. Higher supply means less scarcity, and that means less opportunity for future price growth.
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