With the Australian property market achieving record-high prices over the last two years, many investors are now considering apartments as a viable option to build their property portfolio. While there are many appealing factors of apartment-living for renters, such as lifestyle, location and maintenance, there are also several considerations investors must make before purchasing an apartment.
Pros of Buying An Apartment:
In most cases across Australia, the median cost to purchase an apartment is well below the median house price so for those with a limited budget, apartments pose an attractive option for investment. Particularly for singles or first-home buyers, this dramatically increases the prospects of getting into the property market without breaking the bank and allows them to reap the benefits of ‘rentvesting.’
For those wanting to invest in an inner-city locale with all the conveniences and lifestyle benefits that are attached, apartments are a desirable option for investors as they provide all the attractive elements for renters while still remaining in the budget for investors. For example, many international students and VISA holders across Sydney and Melbourne are commonly drawn to apartments in metro areas as it allows them to remain accessible to universities, workplaces, transport, dining and entertainment at a relatively affordable price.
- Low Maintenance:
A key advantage of investing in an apartment is the reduced maintenance responsibilities. When purchasing a house, investors not only have to maintain the inside of the property but also the exterior, including gardens. With apartments however, maintenance is organised by a committee leveraging the body corporate fees which typically cover: building maintenance, insurance, cleaning of common areas, shared water and electricity. With so many maintenance elements taken care of, this generates widespread appeal for both investors and renters.
Elements to Consider:
- Build times:
When purchasing an apartment off the plan, it is important to be aware of unexpected delays that can impact your end-result. While most properties within Australia average a 10-12 month build time, issues with council approvals, material shortages, labour shortages and price increases, which has been significantly heightened during the pandemic, can blow out build times up to a further 12 months, particularly in high-rise apartment buildings.
- Oversupplied areas:
In order to maintain uniqueness and appeal, an oversupplied market should be avoided. High-rise apartment blocks can limit opportunities for investors, as increased competition restricts resale potential and rental demand. By investing in an apartment with hundreds of identical products in the exact same block, competing for the same tenants and/or buyers, investors will reap little to no financial benefit from their investment. However, by looking for boutique apartments in growing suburbs, investors will often see beneficial returns in terms of vacancy uptake and rent rates.
- Boutique vs Commercial:
Boutique apartments hold a much more personalised and unique presentation that focuses on comfort as they don’t accommodate nearly as many residents as a high-rise commercial apartment building. By investing in a bespoke apartment, investors will often receive heightened demand from tenants, creating favourable outcomes for landlords in terms of rent rates, maintenance and more.
At the end of the day, whether investing in an apartment is beneficial for your property portfolio solely depends on both your preference and financial circumstance. By engaging a property wealth consultancy such as AllianceCorp, our Property Professionals will consider your savings, expenditure, cashflow management and personal preferences in order to effectively select the right property choice to maximise portfolio results.
While AllianceCorp are not advocates for apartments in oversupplied areas, our Property Wealth Planners can assist with your selection by ensuring the apartment of choice fulfils our stringent investment grade criteria to maximise your portfolio results. To find out more about how to select an investment grade property, contact our team today.