The Pros & Cons of Investing in Strata Properties

Investing in strata-titled homes is different from investing in a freestanding property. Each has pros and cons, so let’s look at what you need to consider when investing in strata-titled homes.
Alexi Neocleous

Investors need to look at more than just the home loan products available to them. The type of investments they choose will impact on their success.

Many investors prefer to invest in strata-titled properties rather than freestanding ones. There are plenty of reasons for this, but let’s first examine what a strata-titled property is.

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A strata-titled property is usually part of a larger complex of properties. These properties all share the same building. For example, an apartment may be a strata-titled property. Strata-titled properties can extend from two-floor blocks of residential flats, through to hundreds of units in the same apartment complex.

They differ from freestanding properties because they share their floors, ceilings, and walls with other properties.

You need to consider your own circumstances before choosing between strata and freestanding. A real estate professional can help with this, but there are some basic pros and cons you should keep in mind.

The Pros of Strata Investing

Let’s start with the pros. You benefit from all of the following with a strata investment:

● Lower costs of the property in relation to the land it occupies. This compares well with the land cost of a freestanding property. ● High demand from buyers. Strata properties generally sell for less than freestanding homes. This should lead to capital growth over time, assuming you make wise investments. ● You will pay a strata levy each quarter alongside everybody else who owns a property within the complex. This divides large maintenance costs across several people. ● Lenders favour strata properties, which makes securing a home loan simple. Many lenders will offer a loan to value ratio of 95% on strata properties.

The Cons of Strata Investing

Strata investing isn’t perfect, as there are some downsides you need to keep in mind. Consider the following before committing your funds to them.

● Even though strata levies can save you money, they can still be quite high. This is especially the case for more advanced complexes. Levies increase with extra features, such as fitness facilities and lifts. ● If one block owner sells at a low price, you may find your strata property loses value too. Unfortunately, such issues are beyond your control. This is a risk inherent in strata investing. ● Noise and other disruptions from neighbours may cause problems.

What to do next

As you can see, there’s plenty to consider before you secure a home loan for a strata investment. Your personal circumstances will determine whether a strata investment is right for you. While considering your decision, you should do the following:

Discover how to estimate the value of a property. ● Find out how much you can borrow. ● Live chat with one of uno’s home loan consultants.

This information is general in nature, and you should always seek professional advice when making financial decisions.

Alexi Neocleous
* Four year fixed rate, owner occupier, P&I loan with a maximum LVR of 70% and a loan amount >$150,000. Lender rates and products may change. We cannot suggest you remain in or switch to any loan until we complete our assessment. Fees and charges apply. ^WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rate is calculated on the basis of a loan of $150,000 over a term of 25 years. ± All loan applications are subject to uno assessment and lender approval. uno does not guarantee that it will be able to find a customer a better loan than the one they currently have or to save them money.