Strata titled properties have many distinct advantages and disadvantages over freestanding houses – but do they stack up as a solid property investment?
When you own a strata titled property, it generally means that you own a portion of a larger dwelling or complex.
“Strata title is basically subdivision of land on a vertical plane,” explains Michael Fenech from www.vipportfolio.com.au.
“Generally you'll find that strata titled properties are units that are in boutique blocks of two, right up to massive blocks of 100's of units.”
Strata titled properties are not “freestanding” dwellings in the way that a house is, because they share walls, floors, ceilings and common areas with other owners. You may buy into a strata titled property if you invest in an apartment, duplex, townhouse or villa.
There are several pro's and con's associated with strata titled investments, so there’s no definitive answer as to whether they make a good investment or not. Some investors have enjoyed spectacular results with strata properties, while others believe that a house and land investment always comes up trumps.
To decide whether a strata titled investment makes sense for you, you need to factor in your own financial situation, risk profile and budget.
To help you make the decision, Fenech shares his list of pro’s on con’s for buying a strata titled property:
- The cost of the property relative to the land is much cheaper than buying a house.
- General upkeep of the property is taken care of via the strata levies, which are paid quarterly.
- As the price of these properties is generally cheaper than houses, the demand for them is often quite high, which equates to eventual capital growth in the future.
- Bank lending policies are very favourable towards strata titled properties, so getting finance for them is very easy. Depending on the suburb, you can get up to 95% LVR's (Loan to value ratio).
- The strata levies can be extremely high, especially in larger blocks that have lifts, pools and gyms.
- Strata titled apartments can be quite noisy to live in, given the proximity to your neighbours above and below you.
- Your unit could loose significant value, especially in large blocks, if your neighbour needs to sell very quickly due to a divorce or other financial difficulty.
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