Buying a unit or townhouse can be an appealing option for property investors, particularly when looking for a lower-maintenance property.
However, buying a strata property comes with additional considerations. Shared ownership arrangements, ongoing fees and property rules can all affect the cost and management of your investment.
Understanding how strata works before buying can help you avoid unexpected expenses and make a more informed decision.
What is strata and how does it work?
Strata title is a form of property ownership commonly found in units, townhouses and apartment buildings.
When you purchase a strata property, you own your individual unit and share ownership of common areas with other property owners. These might include driveways, gardens, stairwells or shared facilities.
A strata corporation manages the common property, arranges relevant insurance and oversees the rules that apply to the property.
South Australia also has community title properties, which operate under a different legal framework. While there are similarities, ownership boundaries and maintenance responsibilities can differ.
Understanding the type of title is an important first step when considering an investment property.
What are strata fees and what do they cover?
One of the most important things to consider when buying a strata property is the ongoing cost of ownership.
Property owners contribute towards maintaining and managing shared areas. These contributions are commonly called strata fees or levies.
Depending on the property, they may cover building insurance, common area maintenance, gardening, cleaning and administration.
Some strata corporations also collect money for future major repairs or building improvements.
There may be times when additional contributions are required to cover unexpected expenses or major works. These are often called special levies.
For investors, strata fees need to be included when calculating the ongoing expenses of owning the property.
What strata rules could affect your investment property?
Strata properties have rules that owners and occupants must follow.
These can cover matters such as the use of common areas, noise, pets, parking and changes to the property.
For landlords, it’s important to understand whether any rules could affect how the property is rented or used by tenants.
You should also check which maintenance responsibilities belong to you and which are managed by the strata corporation.
Understanding these arrangements before purchasing can help avoid disagreements and unexpected expenses later.
What should you check before buying a strata property?
Before committing to a purchase, take time to review the strata corporation’s records and financial position.
This includes checking current strata fees, outstanding contributions, insurance arrangements and any major expenses that may be planned.
Meeting minutes can also provide useful information about ongoing maintenance issues, disputes or decisions that could affect future costs.
It’s worth checking whether the corporation has sufficient funds available for expected maintenance and repairs.
A property may appear affordable based on its purchase price, but additional levies or major building works could significantly increase your ownership costs.
Your conveyancer or legal adviser can help you review the relevant documents before you commit to purchasing.
Is a strata property a good investment?
A strata property can be a suitable investment, but it depends on the individual property and your investment goals.
Shared maintenance arrangements may reduce some of the responsibilities involved in looking after a property. However, strata fees and decisions made by the corporation can also affect your ongoing costs.
It’s important to consider the property’s location, rental demand, achievable rent and expected expenses.
Understanding strata is only one part of assessing whether a property is a suitable investment.
Before buying, make sure you understand the ownership arrangements, ongoing costs and any restrictions that may apply.
For help understanding the Adelaide rental market and assessing a property’s rental potential, contact the AMKAR Real Estate team.
This article provides general information only and does not constitute financial, investment or legal advice. Strata and community title requirements vary depending on the property. Seek independent professional advice appropriate to your circumstances.