Apartments

My investment philiosophy at the moment is not to invest in apartments but only houses. I'm aware of some disadvantages of this strategy like I'm priced out of a lot of areas.

My investment philiosphy is to hold on to proerties for as long as I can (hopefully forever).

I would like to know about investing in apartments. My questions is as follows:

1) Do apartments offer good long term capital growth. (I say no, but I have limited knowledge in this area). IE. 50 years
2) I don't like the idea of body corporate as I believe that apartment owners are up for unlimited liability with body corporate. Is there a limit on how much body coprporate an apartment owner has? Or can it be unlimited (IE. major damage to building.)

Besides being able to buy into more suburbs are there any other advantages of investing in an apartment rather than a house?
 
Are there other advantages?? Absolutely. Cashflow / vacancy is generally better in units. Yields are generally higher. Depreciation is generally higher. I would agree that captial growth is not as high however this is not ALWAYS the case. As everyone will always come back to; it's your individual strategy that counts!
 
Pickle,

1. Some of our buy prices for aprtments (you can check re.com for current prices):

Southbank 11th floor 2BR off the plan 2001 completion $300k
Fairfield 1BR bought 2002 $120k
Prahran 1BR bought 2001 $160k
Prahran 2BR bought 2001 $210k
Thornbury 2BR bought 2001 $150k
North Melb (CBD edge, not Nth Melb "proper") 1BR bought 2002 $180k

2. Body (owners) corp is simply joint ownership of the building. It is no different in effect to maintaining building insurance and general maintenance for a house - except that costs AND decisions are shared and reached by voting. Not sure what you mean by "unlimited liability".


Cheers,

The Y-man
 
Hi pickle pickle,

I invest in flats/townhouses/units and houses. My observation is that the strata titled properties are performing very nicely!


My investment philiosophy at the moment is not to invest in apartments but only houses. I'm aware of some disadvantages of this strategy like I'm priced out of a lot of areas.

I like strata titled properties (ie flats, etc) as they are an affordable entry point into inner city areas.

I would like to know about investing in apartments. My questions is as follows:)..

1) Do apartments offer good long term capital growth. (I say no, but I have limited knowledge in this area). IE. 50 years:)..[/QUOTE]

Many flats in inner suburban areas of capital cities have appreciated very well around 9-10% p/a. Flats that are part of a lowrise building (ie 3 floors including the ground floor) and built in the 60's and 70's make good investments. Especially if they come with a carspace/carport. Scarcer apartments - ie. those built in the 1930's (Art Deco) are highly sort after as they are often the size of a small house. Their rooms are very large and they have high ceilings. Elwood in Melbourne has many of these types of apartments.

2) I don't like the idea of body corporate as I believe that apartment owners are up for unlimited liability with body corporate. Is there a limit on how much body coprporate an apartment owner has? Or can it be unlimited (IE. major damage to building.):)..

Owners Corporations have replaced Body Corporates. Each corporation is required to establish and maintain a sinking fund which is to be used for repairs. Special levies can be raised to cover urgent repairs as well. The Owner's Corporation is, amongst other things, responsible for organizing Building Insurance. Your Owner Corporation fees will help to pay for the annual premiums. Public Liability insurance is included as part of the insurance cover.

Besides being able to buy into more suburbs are there any other advantages of investing in an apartment rather than a house?

These are the advantages that I like:

1) Low maintenance - basically need to keep the interior updated and the Owner's Corporation, with the help of your annual fees, is responsible for maintaining the exterior.

2) Higher Yields.

3) Wider tenant appeal as they are cheaper for them than renting a house, and also have less maintenance than a house.

4) You can still add value to these properties by renovating them to a high standard (especially if they are in the inner areas of a capital city) and obtaining a higher yield.

5) Banks treat them in the same manner as a house.

6) Their lower cost and higher yields allows you to keep buying more at a faster pace than buying houses - one day I would like to be able to afford to build/buy a whole block!

Regards Jason.
 
We have owned both units and houses.

Units have some advantages. You are basically only responsible for problems within the unit itself, the body corporate takes care of all external matters. Yes, you pay BC fees, but these include building insurance, garden maintenance, outside maintenance and other things you pay for yourself with a house. Just avoid lifts, gyms and beware of resident managers in small complexes where there are fewer owners to share the costs.

Another advantage is that you can usually buy into a "better" area than if you decide on a house. Just make sure you buy close to transport and beware of the false economy of buying the least desirable unit in a complex, i.e., the one fronting the busy road. We owned a well placed unit in a complex of 80, and most of our tenants came from within the complex - the manager had a waiting list of existing tenants who wanted the more desirable locations in the complex.

Capital gains is a bit of a crystal ball thing, some properties will surprise you with how well they perform, where a "sure thing" may be a disappointment. It is something you will only find out after the event.
Marg
 
Every investment has it own positives and negatives, and you just need to analyse them all to reach you buy point. Is it good enough for you.

I've had units, houses, terrances, townhouses - the lot, and if you buy right you can make money with all of them.

I often meet people who have a set way of doing things. I once had a client that said it has to be positively geared - I found him a property that was going to cost about $500 a year, net - not good enough. He ended up buying in the middle of nowhere and really hasn't made the kind of money that he could have if he just realised that the difference between $500 negative and $500 positive is $1k per year!

Start learning about apartments, they can and might very well be useful for your portfolio.
 
I am planning to learn about apartments. That's why I asked the question. I don't think I'll be investing in an apartment for a while (if ever). At this stage I just don't like them, besides the fact one has more options in areas to invest in.

The plan for the next purchase is to buy a house with at least 4 bedrooms and 2 bathrooms (a potential PPOR, which we can bring up a family in). We already have a 3 bedroom IP in Melbourne. We plan to hold onto that for as long as possible (forever hopefully).
 
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