Buying house and land can feel unrealistic for many, so rather than going all in on house and land – lots of people are looking to buy an apartment as their first home or investment. We sat down with Buyers Advocate and Industry Insider Andrew Date to get his thoughts on buying apartments over houses.
When it comes to any investment, quite often the major thing that determines its value is good old supply and demand – the same applies to apartments. Right now in Melbourne there’s quite high supply in the macro sector of the marketplace, with new building approvals fairly consistent month on month at around 6,000. Given the ample supply in one main sector of the marketplace, Andrew believes there’s significant opportunity to buy well in the apartment space provided you know what you’re looking for.
Andrew’s top apartment buying tips are:
Location, location, location
Location is the most important thing when purchasing an apartment (we believe this applies to basically every property transaction). Buying an apartment within the inner ring of suburbs of Melbourne makes the most sense, you probably don’t want to buy an apartment that’s 50km away from the city where there is likely quite low demand.
Check the internal size
What’s the footage of the apartment? If you need finance, some lenders won’t offer a home loan if the apartment is less than 50sqm. And watch this. The person selling the apartment may measure the size from the outside walls but the bank valuers measure from the inside wall. Don’t get caught out – we’ve seen finance declined because the apartment came in just under 50sqm because of this difference in measurement.
Avoid high density
Steer clear of brand new builds that are considered to be high density and especially any building that has a car stacker (these should be avoided at all costs).
Look at medium to low density
Instead, focus on older medium to low density buildings. These typically to have much lower body corporate fees, have a far better build quality including larger internal footage and for smaller buildings, you may even find yourself with a courtyard.
Don’t let your investment return get eaten up by fees
When selecting your apartment, be sure you check what the body corporate fees are as these can be really costly. High class facilities will usually come with higher body corporate fees. That said, if having a gym and pool suits your lifestyle and you save money on memberships, then you might find the higher body corporate worth it.
What’s the tenancy to owner occupied ratio in the building?
Try avoiding buildings with a really high tenancy rate. Where you can, try and buy in a building with a higher ratio of owner occupied compared with rental tenants.
Who is going to live in the apartment?
Always think about who is going to be living in the apartment. Do you want to live in the property yourself or is it an investment? Who are your likely tenants and what amenities are they going to require? If you’re targeting students, is there public transport nearby? If you are going to live in it, does the apartment have everything you need to support your lifestyle?
And some things to think about when it comes to features, floorplans and architecture:
- Architectural style is important. Modern buildings tend to be smaller, so if you’re after something for a family or with larger internal footage then older, art deco style apartments are a winner. The bonus is they also tend to be a better quality construction, have higher ceilings and because they are quite expensive to build no one is currently building anything like this. That makes these types of apartments scarce, which in turn tends to increase demand.
- Low to medium density is the go. If you can find something with 12 or less units in the building that’s perfection.
- Try to find something with good orientation, natural lighting and lots of windows. A nice, wider style apartment (compared to long and narrow) usually means more natural lighting which is so important.
- The floorplan is equally important. Make sure you can fully open all the doors, that there isn’t a weird bedroom coming off the kitchen or a toilet in your front entry.
- Make sure the communal facilities are clean and well-maintained.
If you take away nothing else, let it be this: buy in a good location. Location is the key to good rental yield and capital growth for most property transactions.
Buying an apartment soon? Get in touch with Entourage so we can review your finance options, particularly if you are buying a small apartment or off the plan. Contact us here.
Photo: Icon Developments