Apartment buying: 4 top tips

Apartment buying: 4 top tips

1. Pre-purchase inspections

Obtain an independent valuation prior to purchasing. This can be used to negotiate with the real estate agent and will provide an indication of how much a financial institution might be prepared to lend you. For investors it will also assess the rental potential of the apartment. You should also undertake a strata report. This will tell you the state and financial health of the overall apartment complex and indicate whether there may be any substantial costs arising in the future.

2. Location

This is still the most important thing in any real estate purchase. Poorly located apartments are difficult to sell and rent and will therefore suffer from lower capital growth and may not be cash-flow positive. Things to consider:

  • Proximity to shops, amenities, transport
  • Appeal of the area and demand for accommodation
  • Rental vacancy rates
  • Future development plans for the area
  • Potential for capital growth

3. Apartment-specific

Generally well designed and functional apartments enjoy greater capital growth and have a greater chance of being cash-flow positive. Some specific points to watch out for:

  • Occupant mix – higher proportion of long-term owner-occupiers is a good sign
  • Outlook and views – a good outlook is always preferable especially if there are outdoor areas and balconies that take advantage of the views
  • High rental yield and low vacancy rates – for investors the rental income from the apartment will be crucial to assess its affordability
  • Financial position of the body corporate – a well-constructed and managed building will require lower overall costs to maintain
  • Reasonable strata levies
  •                 Parking – secure owner and visitor parking

4. Finance

Investors – there are many options for investors to finance their investment apartment. Interest-only loans are very popular as they allow investors to concentrate on paying off their own home loan, which is generally not tax deductible, while paying interest-only on their investment – which is tax deductible. Equity can be used from another property or savings to reduce the purchase costs and avoid Lenders Mortgage Insurance. Watch out for inner city apartments, small apartments less than 50m2 and serviced apartments. Lenders don’t like to lend on these too much due to the volatility in their prices over recent years.

There are also a number of no-deposit home loans. These aren’t suitable for everyone and in most cases you still need to make some contribution of your own to cover costs. There is a 106% home loan in the market that requires no deposit whatsoever; however, it’s only available to people with individual or combined income of $80,000 or more. Also watch out for exit fees on these types of loans as many lenders charge a hefty fee if you close the loan within the first three to five years.

Tips provided by Property Penguin

Can you afford to buy in this suburb? Find out how much you can borrow

Top Suburbs : new farm , reservoir , balga , tweed heads south , willoughby east

go back
  • Marc A Donald says on 11/05/2013 09:10:23 PM

    Thank you for this article, I would like to add a small tip while buying a home which is asking about future plans. Do research about the area that you'll buy your property in or ask your agent because real-estate agents are aware of any future plans that will happen in any area they’re selling property in because they use it as an advantage for the villa or apartment to increase its price. Future plans may be a hospital, bus station, or even a supermarket that is planning to open.
    Thank you,
    Marc A. Donald

Get help with your investment property

Do you need help finding the right loan for your investment?

When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.

Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus and appointment is free.

How soon would you like a mortgage?
What is your Annual Household Income i $
Do you currently own any Investment Properties?
Do you own your own residence?
How much equity do you have in all your current properties?
First Name
Last Name
Where do you live?
What number can we reach you on?
E-mail address
We value your privacy and treat all your information seriously - you can check out our privacy policy here