Apartments tick plenty of boxes. In any given location they tend to be more affordable than houses, they typically involve less maintenance, and amid a growing preference for lifestyle over the traditional quarter acre block, apartments are dishing up healthy rental yields which is good news for investors. As a guide, the latest industry figures from CoreLogic show rental yields on apartments across Australia’s eight capital cities are currently 4.3% compared to 3.4% among houses1.
So far, so good. However with a wide variety of apartments to choose from it is important to select an apartment that ticks all the boxes – strong tenant appeal, the potential for capital growth, and low ongoing costs. We narrow down five key features to look for in apartment to enjoy healthy long term returns.
1. Scarcity
Scarcity usually underpins property values, and buying in a mutli-storey high rise complex where each apartment is pretty much the same, can limit long term price appreciation.
Budget permitting, aim for a low rise boutique development with a small number of apartments. These types of developments offer a sense of exclusivity that will appeal to tenants – and give you an edge at sale time.
2. An appealing location
Tenants often choose apartments because of the convenient lifestyle they provide, and a unit located within walking distance to schools, shops, cafes and restaurants is more appealing than a building in a less central location.
Choose a unit in a street away from main roads, preferably where there is a high proportion of houses rather than row upon row of apartment blocks. Where possible, aim for a north-facing property with lots of natural light.
3. Off-street parking
A tenant’s car is often one of their most valuable assets and the availability of off-street parking can be a deal clincher. Undercover locked car spaces are especially valuable as they double as extra storage space.
4. Kerb appeal
We’ve all seen those tatty unit blocks where garbage bins line the entranceway and junk mail is piled high in the doorway. It’s not a good look, and a lack of street appeal can make it difficult to attract tenants as well as affect the value of the property at sale time. A poorly maintained exterior also raises questions about whether the body corporate is taking a pro-active approach to building maintenance.
Look for apartments with well-maintained gardens or outdoor areas. Not only does this provide kerb appeal, it can also indicate a high number of owner occupiers who may be more likely to take good care of the property. Do check if superior maintenance means paying higher strata fees, though the additional cost may be offset by improved long term capital growth and lower vacancy rates.
5. A clean bill of health
Just as it pays to organise a pre-purchase pest and building inspection of a house, anyone investing in an apartment needs to think about arranging a strata report.
A strata report involves an inspection of the strata records and accounts maintained by the building’s owners’ corporation. The report may show evidence of unresolved legal issues, disputes between owners and pending building works – an expense that you, as a new owner, may be asked to contribute towards.
Have you recently bought an apartment? What were the features that sold it to you?