Home Real Estate Investing in Strata Properties – Here’s What You Should Consider

Investing in Strata Properties – Here’s What You Should Consider

The real estate market in Australia can be somewhat confusing for first-time buyers and sellers. For them dealing with strata property appears as a huge hassle. Arming yourself with sufficient knowledge about strata property ensures you don’t lose a dollar when investing for the first time.

Essentially, it all comes down to who owns which section of the entire property and whom you have to ask for permission. The legislation passed half a decade ago in New South Wales regulates strata property ownership in Australia, so everyone’s responsibilities are crystal clear.

Things to check before you invest

If you are serious about investing in a strata property, then there are several things that you need to check before cashing out the down payment. Ask for and evaluate the financial records of the strata company to ensure they have managed and they will manage the property in a responsible manner.

Furthermore, scrutinize all previously resolved issues, so you familiarize yourself with potential problems (sloppy maintenance, rowdy tenets, etc.). Finally, don’t fail to ask if there is any major renovation work planned in the upcoming months and years, as the last thing you want is for your investment to turn into an unprofitable construction site.

Who owns what: The concept of strata property

People outside Australia have a hard time understanding how strata property works. In a nutshell, strata property allows you ownership of a “lot” (in a residential building it’s an apartment), while the remaining part of the building is considered common property.

The inside of the housing unit belongs to you but the playground, lobby, the driveway, and the courtyard outside is owned by all the tenants. However, tenants don’t manage this common property together, as strata companies administer these premises. They take care of everything: from regular cleaning to general maintenance.

A broken lightbulb in the hallway

A great example to demonstrate how strata ownership work is to examine what happens when a lightbulb goes out in front of your front door in the hallway. Since the minor malfunction occurs outside our apartment, it is up to the strata management company to replace the lightbulb in question, despite the fact you can fix it in no time. However, if a lightbulb goes out inside the housing unit you own, then it’s up to you to replace it.

What can go wrong?

As you have realized by now, communal living in a strata property is ideal Australian conditions. However, before you actually invest in a strata property, you should know how potential issues are resolved. These can occur between landlords (i.e. you as the owner) and tenants, owners might have problems with other owners’ behavior or the majority of owners could team up against the strata company and their dubious maintenance methods.

For this reason, excellent strata management in Sydney and other Australian cities is essential when deciding where to invest. Professional strata companies have a special department for mediating possible disputes and resolving them to the mutual benefit of all parties involved. Furthermore, a reliable strata management company will hire only the best managers, who are both responsible and knowledgeable.

Being a responsible owner of a strata property

The fact that you own only an individual lot with accompanying “airspace” doesn’t mean that you or your tenants should be irresponsible towards communal property. Whether you decide to nail a picture on the home of your apartment is completely your choice but you cannot allow yourself the same liberty when beautifying the hallway or the park in front of the building.

Of course, most managers are open to landscaping ideas that will improve the standard of living but you should leave the execution to these improvements to them. They will also organize the waste disposal system but that means that tenants can litter common property just because they aren’t the ones picking the trash up.

Different types of renovations and permits

We’ve mentioned in the introduction that NSW passed a Strata Schemes Management Act back in 2015. As the name suggests, the Act delineates the responsibilities of everyone involved in a strata scheme. For instance, renovation work is divided into 3 sections: major, minor, and cosmetic work.

Cosmetic renovations require nothing more than notifying the strata committee and even this is optional, as you don’t need their consent to hand a picture on the wall of your apartment. On the other hand, minor improvements need to get a green light from the strata committee. Luckily for owners of strata property, the decision is not made at a general meeting, which speeds things up a lot.

Finally, if you wish to tear down a wall, which is something investors often do, then the strata committee needs to pass a special resolution at a general meeting. Before investing in a strata property, you need to feel the pulse, sort to say, of the committee members to see if they are willing to allow major structural work on the building or a house.

The issue of pet ownership

It might seem like trivial issues, but three in five Australians own a pet, so pet ownership is an important issue for tenants. Most strata properties in New South Wales are pet-friendly. The only prerequisite is that you notify the owners’ corporations that a tenant will bring a pet on the estate. After you clear this, you can advertise the house or an apartment as “pet-friendly,” earning you a few extra dollars.

Investing in a strata property in Australia can be lucrative. However, you need to take the time to research in what kind of a strata scheme you are investing your hard-earned money.

Ana Hoffman
Anna Hoffman is a part-time blogger who writes on Business, Technology, Digital Marketing, Real Estate, Lifestyle, and Educational topics.
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