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Are Townhouses a Good Investment?

The simple answer to this question is yes, townhouses are a good investment, otherwise ABN Realty would not be offering these properties as a lifestyle or investment opportunity to clients. But, as with any property purchase, the advantages and disadvantages must be carefully considered.

 

“As I always say – a person’s property investment objectives, whether it’s to live in or for an investment, must be personally tailored to suit their individual circumstances and for many people, these types of properties offer an attractive proposition,” said Peter. “But it is important to remember there are many different types of strata properties out there and they should not all be lumped into the same category. Purchasing in a strata development of five or six units is a very different proposition to buying into a multi-level apartment building with more than 100 units. It’s like comparing apples and oranges.”
 
To understand if strata titled properties are a good investment, it is important to understand exactly what ‘strata title’ means. Some of the main features to consider include:
 
  • This title grants ownership of a section or a ‘unit’ of a larger building or development;
  • The ‘unit’ can be sold or transferred by the owner; 
  • Strata titled developments often have shared walls, floors, ceilings, facilities and common areas;
  • May include many different types of properties including apartments, units, townhouses, villas, duplexes or triplexes;
  • As the owner of a strata titled property you become a member of the strata company which entitles you to participate in the management of the overall property;
  • Owners must abide by any by-laws (or rules) of the strata company;
  • Owners must pay levies to administer the strata scheme such as insurance, maintenance and repair of common property;
  • Owners have the option to attend meetings to discuss and vote on issues including expenses, repairs, improvements and management of the complex;
  • Depending on the type of strata title, any changes or improvements you make to your property may need prior approval by all other owners in the complex;
  • Some strata units, such as retirement homes, may have age restrictions in place such as 55 years and over.
 
Unlike a green-titled property (which is totally freehold ownership) you many find you have greater involvement with the other strata owners due to the proximity of the properties and shared interests in the common areas. As such, if purchasing a strata titled property (particularly in an established complex) it is important to consider a few additional questions before deciding if it is a good investment. These include:
 
  • What is the age group/mix of residents?
  • Are the units owner-occupied or rented?
  • What are the costs of the strata fees, levies, rates and insurances?
  • How old is the property and are any major repairs required?
  • Are there any shared facilities (such as a gym, swimming pool and lifts)?
  • What are the rules about pets, car parking and use of common property?
  • What procedures are in place for maintenance issues?
  • What is the financial position of the strata company?
  • How often is gardening and maintenance carried out, and by who?
  • Does the strata council employ an external strata company to manage the complex?
  • Are there any fees, insurances or claims pending?
  • How are disputes resolved?
 
The more units there are, the more complex it may become and often you will find developments with smaller numbers of units are often managed with fairly few hassles.
 
Plus, in smaller developments with less units you will generally find minimal shared facilities such as pools and gyms so this will reduce the maintenance and upkeep costs, resulting in reduced strata fees for owners.
 
So with all these extra considerations in place, are townhouses a good investment? Yes, buying strata titled has a number of advantages. Firstly, strata titled developments usually make extremely efficient use of the land – especially if they are designed and constructed by an experienced builder. A reputable builder will carefully consider each dwelling and its relationship to others within the development to achieve the best possible outcome for all owners. The efficient use of the land means the cost of the property relative to the land is much cheaper than buying a house and this is often very attractive to buyers. This is particularly relevant in areas where the cost of land is high such as inner-city locations or in popular suburban areas. “We see this on a regular basis with many buyers who come to see us,” said Peter.
 
“Often they have their heart set on a large property in a desirable area but due to the popularity of the location, the property may be just out of their reach.
 
“If ABN Realty is able to offer a strata titled opportunity in their preferred area, it means they don’t have to compromise on location and they are not over-stretching themselves financially.” And because the purchase price of the strata titled properties are generally cheaper, they are usually in high demand which can result in attractive capital growth in the longer term.
 
“If you buy into a strata titled complex you always need to be aware there is the potential for one of the other owners to sell their property below market value if they need to sell quickly and this has the potential to unfairly bring down the value of your property,” Peter explained.
 
“But this should not deter your decision to purchase. Generally if the property is in a well presented complex in a good location, history shows it should always retain its value, even if another owner has previously sold in a hurry. “The important point to always remember is that the location is just as important as the property. “No matter how appealing a property is, you should not buy if the location does not have the potential for strong future growth or else you are doing yourself a complete disservice and will not achieve the returns you deserve.”
 
Strata titled properties are generally viewed as good investments with financiers for both owner occupiers and investors so getting finance should not be too onerous. Depending on the suburb, you may be able to obtain up to 90% LVR (loan to value ratio) for owner occupiers and 85% LVR for investors. “Strata titled properties are well suited to first-time buyers who may be on a limited budget but still want to buy a quality property in a good location or for experienced investors who may be looking to grow or diversity their portfolio,” said Peter. 
 
“Plus if you buy from the ABN Group purchasers have the added advantage of knowing the property is expertly designed and constructed by a company who has more than thirty years of experience in the industry so they can be comfortable they are buying quality,” Peter continued. “We have many people asking us for strata titled properties and we have responded accordingly and will be increasing the number of strata titled properties in the form of townhouses and villas we offer, but only if they meet our strict criteria.” 

Finally, if you are considering a strata titled property as an investment, they are often very popular with prospective tenants because they are safe, secure and there is social interaction. This is a good investment for young singles, professional couples, female occupants who may live on their own and do not wish to be in an isolated location or elderly residents who prefer daily interaction with others

The low maintenance, ‘lock-up-and-leave’ lifestyle is very desirable to many, particularly as the best strata titled developments are usually in close proximity to public transport, shops and community amenity. 
 
So are townhouses a good investment? If you can find the right strata property in a strong location, it is definitely worth considering. It goes without saying you should never jump in feet first without doing your research but strata titled properties have historically proven to be very beneficial for many property buyers in WA. If you would like further information about understanding strata titled opportunities and if they are a good investment for you, or to find out what is available to purchase, speak to our team on (08) 9200 7200. Alternatively, view some of our properties available or contact us or book an appointment with our team of Perth Property Investment specialists.
 
 
DISCLAIMER: This information is of a general nature only and does not constitute professional advice. We strongly recommend that you seek your own professional advice in relation to your particular circumstances. Investor Assist Pty Ltd Builders Registration No. 13818.
 
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