Unit & Apartment buying, what to look for?

The question that every investor, first home buyer or property purchaser asks. 

Generally both have great aspects; however, making the right choice is the hard question that is always a difficult decision.

For many, buying an apartment to live or to buy would certainly be a life changing experience.

Essentially you have two buyers:

1. The Investor
2. The home owner

Both have two expectations and want to maximise their purchase regardless of the situation.

10 years ago I would’ve advised my clients to secure new apartments for the simple reason being “demand”. However market trends and property buying has reached an entirely new level, and I have some great pointers below on what the benefits are for individuals who may be scratching their head with uncertainty.
The new apartment or off-plan purchase

Buying new is a great way to take advantage of the government incentives on offer if you are a first home buyer, the OSR (Office of State Revenue) has the buying guidelines of new apartment incentives whether it being stamp duty exemptions or capital incentive to buy off the plan or new, there are some great incentives driving the property market into a buying frenzy. This, along with foreign capital injection and low interest rates is a recipe for a boom.

Here are some of the benefits of buying new apartments;

1. Brand new property with warranty inclusions
2. New apartments these days are approx. 55m2 for 1 bedders / 78m2 for 2 bedders / 95m2 for 3 bedders internally as oppose to older type strata complex’s that range in the 60m2 internal range for 2 bedders. Essentially they are built these days a lot bigger than 10-30 years ago.
3. Home warranty ( Subject to building height’s )
4. Tax depreciation and benefits
5. Possibility of growth when buying off the plan up until the apartment building settles
6. Flexibility
7. Buying a property with new technology, light saving devices, energy efficiencies and lower greenhouse affect
8. Securing where you want to be or where you want to invest
9. Having the security of what you are buying is what you have seen or been told is correct
10. Timing
11. Assessment of market growth and yields
12. Knowing the building company and reputation behind the product

13. Essentially hassle free of property issues 
14. Buying in the location you want to be for yield projection or simply to live
Here are some of the issues in buying new apartments;
1. Defects ( this is the most common problem of buying new )
2. Issues with the structural composition of the building 
3. Possibility of paying too much off the plan and losing money
4. The quality of the finishes aren’t what they are supposed to be
5. Noise or the apartment aspect and position are not what you expected. 
6. Water issues ( one of the largest complaints due to new dwellings and apartments, as water proofing was not completed to a satisfactory level, in most cases, this is not entirely the builders fault? Why? Because it is too hard to ascertain whether or not the water proofers have completed several layers of proofing) from a property management perspective, be mindful of this.
Whether buying off the plan or newly finished, the word “Perfection” is something buyers/investors need to dismiss, why? Because there is no such thing as a perfectly built new property, in some instances it’s neither the builders fault nor the structure. Every new property will have a minor issue, “it’s a fact”. 

Whether it’s a sloppy door handle or faulty dishwasher, there is always going to be a problem with buying new property. Even to the extent of “Movement” naturally our planet “Earth” as we know it plays another role on property. Rest assured there are plenty more issues that I can provide during my time of Real Estate I have observed some pretty gut wrenching issues. 

Therefore be mindful of who you are buying from, the builders reputation and the area you are buying in. Surrounding Infrastructure and overall size of the development can play a significant part down the track.
With my experience 90% of buyers that have purchased new apartments whether off the plan or completed have had no issues and made the right decisions. My advice is, do your homework and simply jot down the “Advantages” and “Disadvantages”, weigh these two side by side and you will have a better understanding and direction.

Buying an apartment (Unit) in a 10-30 year old building

Buying an older style apartment is very much like buying a second hand car, essentially you need to carry out an investigation, my recommendation is to put yourself in an “FBI mind-frame” and follow the below simple guidelines that will ensure your process of due diligence is carried out effectively and efficiently. The issues that occur with buying, is that many buyers tend to miss the boat for the simple reason of “time”. Timing is critical and as you know in today’s market you need to be on your “A” game when trying to buy a property whether it is “For Sale” or at “Auction”, because you will miss out.
There are some advantages that many tend to disregard when buying older type apartments actually they are called (Units) and buyers nowadays are in a rush and leaving the appropriate assessments leading to their purchase unnoticed. 

A few simple pointers to take into consideration;

1. Conduct a strata report, make sure you assess the raised issues such as;
- Defect works
- Upgrades
- Water proofing issues
- Water leaking
- Previous structural notes and claims
- Insurance claims
- The most recent AGM or raised owners corporation meeting that took place and what was it about?
- Recently adjusted levies?
- Break down of the costs associated with the building contract maintenance this is called the AGM summary or annual agenda. Try to look at any increase in fees and clearly ask the Strata company or manager what is was for and when? 
- Overall condition of the unit – is it in working order? 
- Pest and building report

Many pest and building reports are “templates” already mocked up by the assessor and during the assessment the inspectors input the main issues with a few adjustments depending on the condition and shoot it through. Some buyers are turned off straight away with the size and the pages of this report and in some cases do not proceed. Buyers are not builders and builders are not buying, they are basically covering themselves and note every issue in some instances irrelevant and off-putting to the buyer. When I personally ask an investor or buyer why have you taken so long to buy? In some cases this is what I believe has happened. 

The most important procedure to an inspection is for the builder to ascertain previous water damage or mould and penetration from this into the unit. The shell is covered by the owner’s corporation insurance; PLEASE carefully understand this (Strata is responsible for the wall under the layer of paint, the ceiling roof underneath the ceiling grid or paint, the floor concrete underneath the carpet and underlay ) So essentially, any water that is penetrating through the apartment is a strata issue. 

However, you are probably thinking why an older unit? So much to do and watch out for, this is the part and parcel procedure in buying the right way and will lead you to making a great choice because in actual fact there are many bonuses in buying an older unit.

1. The building foundation is settled and whatever issues have risen in the past are now fixed and working fine. Meaning, the building being that old has settled as a structure, when I studied building & construction, concrete to completely cure in strength can take up to 7-10 years. 
2. An established and excessive “Sinking fund” is already in place, in simple terms, you have access to other people’s money whilst having an opportunity to add value to the building and the owner’s corporation and advise them of upgrades that should take place, and in turn this improves the value of your property.

An upside they can advantage a buyer looking for an older style unit within a 10-30 year old block; 

If Building example “A” has 12 apartments and was built 30 years ago, no doubt the building would have been constructed on approximately 20% -30% of the land, (meaning the envelope of the land) was not entirely built to boundary. Ok confused? Have you ever walked into an older style apartment block and wondered why there is so much land and space around the building? Well in those days, regulations to build strata unit blocks were different to what they are today, and the reason for this is simple ‘Space”. Sydney had loads of space to build back then. 

Where this is an upside to buying in a boutique older style block is taking advantage of the sinking fund. My advice would be to attend all “AGM’s” and try to position your-self within the committee. Why? Because that sinking fund will benefit not only your property, everyone else’s in the building.

Older type apartment blocks had no lifts? And loads of communal space and staircase space, surely there would be opportunity to submit forward to the committee a proposal to include an “upside” installation subject to an engineer’s report and owners corporation approval add an internal or external lift shaft? And use the money to upgrade the look of the building? Benefit the building envelope where necessary by looking at increased balcony space, structural internal increases, even adding additional income to the owner’s corporation fund by using this fund to add value upgrade to the development by seeking architectural advice to possibly even add a dual occupancy granny flat or rear self-contained dwelling. Is this all possible? Yes why not! This is by far increasing the building value; in turn you are increasing value for every other apartment. The owners would be throwing the flowers on the ground you walk on. Does this sound all too hard? In actual fact it’s not, it’s simply doing your homework and doing it quickly. 

This information above is sort after advice from my Building, Strata, Development & Real Estate experience that I have ascertained over the last 15 years. 

Anything is possible when buying an older style unit, the opportunities are endless, moving forward most these buildings are becoming older and older by the year, therefore rest assured opportunities such as the above are available and can work, and thinking outside the general scope of buying is what my advice is for the apartment/unit buyer. 

Buying new and old has its up’s and down’s, however, if you are buying with a savvy approach and knowing the opportunities with a reasonable amount of homework, you will be fine. 

If you would like to discuss the above scenarios in depth, please do not hesitate to contact me.
Written by Paul Salsano 
Onside Property Group
Managing Director LIC BS
PH: 1300 938 931
MOB: 0433 230 000 

www.onsideproperty.com.au
www.dulwichhill-realestate.com.au
paul@onsideproperty.com.au