The Pros & Cons of Investing in Strata Properties

Investing in property is a significant financial decision, and understanding the nuances of different types of properties is key to making a wise investment.

Strata titled properties in Australia offer a unique investment opportunity, but like anything, they come with their own set of pros and cons.

Here, we aim to guide you through the intricacies of strata properties, and equip you with the knowledge to make an informed investment decision when it comes to strata titled property.

What is a Strata Titled Property?

A strata titled property differs significantly from a standard property.

At its core, buying a strata titled property means you own a part of a building, usually an apartment or townhouse, along with shared ownership of common assets like gardens, driveways, carports, pools and gyms.

This setup is governed by a legal entity known as the ‘owners corporation’ or ‘body corporate’, which manages the common property and enforces rules for the benefit of all residents.

This communal approach extends to financial responsibilities, with owners contributing to a common fund for upgrades, maintenance and repairs in these common areas.

Unlike individual property ownership, strata living involves a collective approach to property management.

Community living: Strata titled properties offer a sense of community, with each apartment, unit or townhouse sharing common areas and facilities.
Shared responsibilities: Maintenance and repairs of common areas are a collective responsibility, leading to shared costs and decision-making.
Strata management: A strata titled scheme is managed by an owners corporation, ensuring that the property is well-maintained and that rules are followed for the benefit of all residents.

While strata living offers a sense of security, it also requires adherence to common rules and cooperation with other owners, whether landlord or owner-occupier.

Understanding these dynamics is crucial for anyone who is considering buying a strata titled property.

From an investment standpoint, strata titled properties are unique in that you’re not just buying a unit; you’re buying into a shared space.

Essentially, it means that while you own a portion of the building (an apartment or townhouse, for instance), you’re also able to offer tenants the perks of common areas and shared facilities they may not otherwise have access to.

But the biggest appeal of strata properties often lies in their location and easy maintenance, which can be significant drawcards for tenants.

The Benefits of Investing in Strata Titled Property

Particularly for investors, strata titled properties offer a range of benefits that can help build a profitable investment portfolio, making them an attractive option.

Higher rental appeal: Strata properties, often located in desirable urban areas, can attract a steady stream of tenants.The perks of shared amenities, and their typically convenient location make them highly attractive to renters, which often leads to lower vacancy rates and higher rental yields over time.

Affordability: Generally more affordable than standalone properties, strata units offer a lower entry point into the property market, allowing for portfolio diversification and easier access for investors to high-demand urban areas.
Shared maintenance costs: As part of a strata scheme, maintenance costs for common areas are shared among all owners. This can result in lower individual maintenance expenses, saving money in the long run and making it easier to manage cash flow for your investment.

Professional management: Many strata properties are managed by professional bodies that handle the day-to-day upkeep and long-term planning for the property. Not only does this save many unnecessary headaches for landlords, it offers peace of mind knowing that their property is actively managed and well-maintained.

Potential for capital growth: Well-located strata properties can often experience significant capital growth due to their lower purchase price and ongoing demand, hopefully giving your portfolio a boost.

So investing in strata properties can be a smart move for those looking to capitalise on rental demand and affordability.

However, it's important to be aware of the unique aspects of strata living and how they might impact your investment.

And like anything, strata titled properties also have their drawbacks.

The Disadvantages of Investing in Strata Titled Property

While the benefits are appealing, investors should also be mindful of the potential downsides of strata property investment.

Ongoing fees and levies: Strata properties incur regular fees and levies for maintenance, management, and insurance of common areas. These can be significant and vary depending on the size and amenities of the group, so it’s important to factor them in to your calculations when calculating the potential return on your investment.

Limited control over property decisions: As part of a collective, property owners often have limited control over the management and decision-making processes. Decisions regarding major renovations, repairs or changes to the common property are typically made by the owners corporation, which can lead to disagreements among members. This type of management can also impact your ability to implement changes that could increase the property's value or appeal to tenants, as any improvements need to be agreed upon by the governing body.

Complexity in governance and compliance: Navigating the rules and by-laws of a strata scheme, and dealing with management bodies can be complex and time-consuming, and understanding obligations can be challenging - especially for new investors. So if you’re planning to invest in a strata titled property, it’s essential to get your head around it to avoid disputes or legal issues.

Market volatility: Finally, the value and demand for strata properties can be more susceptible to market changes, recent sales and trends that are outside of your control. For instance, if one unit or apartment sells at a low price, all properties within that complex may suffer too. So as with any property investment, it's important to stay on top of local property market movements and any broader economic factors that could impact your investment.

Is a Strata Titled Property Right For You? Here’s What You Should Know.

When deciding whether or not to invest in a strata titled property, there are several things to consider to ensure that it’s a sound decision for you, including:

Shared amenities and facilities: The larger and more comprehensive the complex, the higher the strata fees. For instance, a complex that offers a swimming pool and gym is going to be more expensive than one that just has a simple shared garden space. While these assets can increase the property's appeal to tenants, it’s important to decide whether the added expense justifies the potential increase in rental value.
Age of the property: As with any real estate purchase, the age of the property plays a big part in the decision making process. While likely cheaper to buy, older strata properties may require more repairs or renovations over time - leading to higher strata levies - so it’s crucial to weigh up the lower property purchase price vs. potentially higher ongoing costs.
Diversity and choice: Strata properties come in all shapes and sizes, catering to different needs and budgets. So assess whether the specific strata development you’re looking at aligns with your investment objectives. If not, don’t worry - there’ll always be another one around the corner!

Strata property investment offers a range of unique opportunities and challenges for investors.

And while it can be a smart move for those looking to capitalise on high rental demand and affordable property opportunities, understanding these nuances is essential in determining whether this type of investment aligns with your overall strategy.

But with careful planning, and by balancing the potential for high yields against the ongoing costs and limited control, you can make an informed decision about introducing a strata property into your investment portfolio.

-------

And if you’d like some expert guidance and support? We’re ready and waiting to answer all your questions!

If you’re just getting started, or looking for valuable property investment, buying or selling tips, tricks and advice, check out these other handy articles on our blog:

× Frequently Asked Questions About Property Investment

× Finding a Good Property Manager

× How Routine Inspections Safeguard Your Investment

And for all the very best, tailored property buying, selling or investing advice, why not connect with us?

We Connect Property are your local property market specialists with over 21 years’ experience in buying, selling and managing property in southern Adelaide.

Check out our 5 star Google reviews to find out what our happy clients think!

We’re ready and waiting to offer expert guidance and support when you need it most, and answer all your questions about property investing.

Give us a call on 0403 799 983 today, or drop a line to [email protected] - we can’t wait to chat!

To stay connected with everything real estate, follow us! Facebook | Instagram | TikTok | LinkedIn | YouTube

Or connect with us today for more information: Connect Now

We Connect Property - your Adelaide real estate and property management specialists.

DISCLAIMER: All recommendations made by We Connect Property are general in nature and not to be relied upon as legal or financial advice. To ensure accuracy, we always strongly recommend seeking independent, professional advice tailored to your specific situation before making any investment or financial decisions.