What is a Strata Title Property?
Are you about to take on an investment property? Looking at purchasing a unit or apartment? Finding the technical jargon pretty daunting, and starting to wonder what type of investment property really is best for you?
We’re on your side. And we understand that the whole real estate and investment world can be pretty daunting: so much jargon, so many different options, and at the end of the day, so much money tied up in your purchase.
Today we’re taking a closer look at Strata Title properties, what this means and what’s involved. We’ll also have a quick chat about how the team at Love & Co can assist you in making sure you get the best bang for your buck from your investment properties.
What is a Strata Title Property?
When you purchase a new house or property you take possession of the piece of land and the assets on it. In other words, you purchase the land title, or the entire property.
Strata investment works a little bit differently.
A Strata Title gives the investor ownership of the specific lot (e.g., apartment, unit, townhouse or house in a development) as well as shared ownership of the common areas that are used by tenants of the development (e.g., stairs, lifts, corridors, garden areas).
Strata title properties come in many different forms: townhouses, retirement village developments, retail and commercial properties, serviced units and apartments. They’ve become a popular investment in Australia, and especially around Melbourne city.
Is Strata Title Investment Popular?
The numbers doesn’t lie: in June 2020, it was estimated that there were more than 270,000 strata schemes in Australia! So, what’s made it so popular?
Without doubt there are many factors behind this investment trend, and we’ve listed out a few of the main reasons here:
- Australia’s growing population, especially in the major cities
- The conversion of older properties to strata title
- Governments encouraging urban growth upwards rather than outwards, to prevent urban sprawl
Strata living has become a key feature of modern urban living – these housing options are low maintenance, affordable and often conveniently located.
And for investors it’s often a smart choice, especially for those making their first entrance into the property market.
How Does it Work?
Individual investors purchase properties (e.g., an apartment in a block of apartments) but the block or complex as a whole is managed by a strata management agency.
Strata management handles the day-to-day running of the property – everything from organizing the maintenance and repair of common areas, to paying invoices and collecting strata levies.
Each owner pays strata levies, which contribute to the overall running expenses of the complex.
Pros and Cons of Strata Title Investment
Every type of investment has pros and cons; there’s no such thing as the perfect investment. So, let’s take a look at the advantages and disadvantages of strata title investment.
Pros of Strata Title Investment:
- Cost: buying a strata titled property often requires less outlay than purchasing a freestanding house.
- Less property maintenance: a lot of the general maintenance of the property is undertaken by the strata management team, so it’s not your responsibility.
- More facilities: shared access to communal facilities (where applicable) makes for an attractive rental property.
- High demand: strata living is popular with renters
- Better re-sale value: the popularity of strata titled properties could mean a greater re-sale value in the future.
- Depreciation benefits: if the property is new, you may be eligible for substantial depreciation benefits.
Cons of Strata Title Investment:
- Strata fees can increase unexpectedly: strata levies can blow-out, especially in properties with extra facilities such as gyms and swimming pools.
- There may be costs you can’t budget for: because you aren’t in control of the repairs and upgrades to common areas, you can’t exactly fit these expenses around your budget.
- Unexpected devaluation: if a neighbour has to sell his/her property quickly and for a lower price, it may de-value your property significantly.
- You can’t add rooms: it’s not easy to upgrade your investment by adding another bedroom or bathroom.
- No pets: strata living often comes with some restrictions, e.g., no pets or restricted parking. These restrictions may reduce your potential tenant base.
Is Strata Titled Property the Right Investment for Me?
When it comes to investing in real estate, what’s ‘right’ or perfect for one investor may not be for another. And there are as many opinions on the subject as there are folk to offer them!
We suggest that you talk to the pros:
Love & Co. is an award-winning strata management team with more than 7 decades of experience behind them. We understand property. We know the market in Melbourne’s North like the back of our hand! And we’re here to help you find an investment property that suits your budget and meets your expectations.
The information in this article is for information purposes only and should not be taken as financial, legal or personal advice.
While care has been taken to ensure that information contained in this article is true and correct at the time of publishing, any changes after the time of publication may impact on the accuracy of this information.
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