Buying into Strata from an investors point of view

Buying into Strata can be attractive to investors. Strata properties are often cheaper than houses, and rental returns can be higher.

However, Strata titled properties have shared walls, floors, ceilings, gardens and other common areas. These are considered shared ownership through a legal entity called the owners corporation or body corporate – and they require finance for their upkeep.

So while there are some great pluses, there are other costs and aspects to consider too.

Strata Levies

Strata levies, usually paid quarterly, are paid to cover shared expenses such as the general maintenance of the common areas, building insurance and strata management. This payment is made by the landlord, so will need to be factored into your budget. Strata levies can be high in Newcastle, particularly if the strata has shared amenities such as pools and gyms.

It’s worth noting too, if the strata levies are low it may be because necessary maintenance has been neglected – be warned, you may be hit up for additional levies later down the track to cover these costs.

Rules and Regulations

There are certain rules and regulations strata owners (and hence tenants) have to abide by. Known as by-laws, they are generally made on issues such as safety and security measures, floor coverings, outside decor etc.

Strata schemes can adopt model by-laws that are set out in the Strata Schemes Management Act 1996, or they can make their own. For instance many strata corporations do not allow pets and some go as far as to not allow washing hanging over balconies.

Always check the strata by-laws and make sure you give your tenants a copy.

Strata Meetings

Strata Corporations hold an AGM each year and there may be incidental meetings in the year if issues arise. You do not have to attend these meetings as you can give your proxy to the Presiding Officer. However, it may be in your interests to attend if there are some serious issues, such as major renovations, on the agenda.

What Else should I Consider?

Always ask to see past Strata minutes – that way you’ll find out if there have been any past issues and whether any renovations are planned. Plus, if the property has been renovated in any way, the Minutes will highlight whether appropriate permissions were sought. If the renovations did need permission, and permission hadn’t been given, the Corporation may hold the new owner liable for corrective actions.

It’s also handy to know the mix of owner occupiers and investors; owner occupiers are more likely to flag up any Strata issues sooner rather than later.

Strata properties can offer good investment opportunities, but like every potential investment property, it pays to do your homework.

For more information about Strata, visit www.stratacommunity.org.au or download the Strata Living booklet from the NSW Office of Fair Trading website: http://www.fairtrading.nsw.gov.au/pdfs/About_us/Publications/ft045.pdf

If you’d like to know more about strata and property investment our team would love to help. Give us a call on 02 4956 9777 or pop into our Cardiff office.