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Investing in Strata

Wednesday, 21st January 2015

If you're thinking about buying an investment in a strata property there are some important things you'll need to know. Chris Duggan, from Bright & Duggan Strata Professionals shares his advice on what makes investments in strata different and what to look for before you buy.

 

 

 

Do your research When you buy into strata, you’re buying a share in a community so it’s important to know what you’re getting into. A professional strata search will typically cost you between $250-350 but will provide invaluable insight into the governance, finances, compliance and management of the scheme. You’ll also need to find out how the by-laws operate, especially if you’re planning building renovations like kitchens, new flooring or tiles. These are all likely to impact on common property and will require formal approval well before you begin.

Top tips

  • Look for any signs of disharmony. This may impact on the ability of the owners corporation to make effective decisions and could cost you time and money.
  • Look for a good mix of owner occupier to investors, preferably with more than 50% owner occupied
  • Find out if the owners have any long term plans in place. Don’t inherit someone else’s problems or lack of planning.                                                          

Seek financial advice

It’s important to get the right professional and independent advice from an accountant or financial advisor up front. Consider the purchase structure of the property and what will work best for your circumstances.

Top tips

  • Understand the tax implications and know what you can claim. Depreciation reports for the lot and common property are underutilised and could maximise your deductions.
  • Make sure you take out a landlord’s insurance policy to cover items not insured through the owners corporation.
  • If the property is owned by a company or self-managed super fund, ensure you provide a company nominee form, allowing you to represent the lot at meetings.                    

Take an interest

Once you’ve bought into a strata scheme, get involved. At the very least, ensure you attend the Annual General Meeting, where levies are set, compliance matters are discussed and the executive committee is elected. If possible, participate on the executive committee and contribute to the running of the scheme. If you want to be passive, be prepared to passively watch other owners make decisions on your behalf.

Top tips

  • Strata plan accounts and files can be accessed 24/7 with secure portals making it easier to keep abreast of the management of a scheme.           
  • Participation in strata decision making may be done by phone, email, webcast or remote postal votes. 

Plan for the future

Like any investment, ensure your owners corporation has a plan for the future and has clearly defined rules and processes. Consistency in the raising of levies and the application of by-laws makes investment decisions easier to make and is more attractive to potential buyers.

Top tips

  • Levies should be set to cover administrative running costs (admin fund) plus setting aside capital upgrade funds (sinking fund).
  • Surplus funds in the sinking fund should be invested to work for you. Make sure your strata manager is actively managing your money.

For further information and advice about buying a property in strata, contact Chris Duggan of Bright and Duggan, Strata Professionals on 9902 7167 or email [email protected]

 

By Chris Duggan

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