Understanding strata and how it affects investors
Units are becoming a very popular type of housing in many parts of Australia due to their attractive prices, low maintenance and potential for high returns. But when you're buying apartments, units or townhouses, you might have come across the term "strata". Figuring out how much strata is for a Queensland rental property is useful, but it really pays to actually understand what it means and how it may affect you as an investor.
Strata is a system in Australia that manages ownership of common property in retail, residential, commercial, mixed use and other settings. Properties with a strata title are usually ones that share space with other owners. Think of an apartment building and common areas such as entranceways, elevators, corridors and communal gardens. An investor buys an apartment with a strata title and will share the responsibility for these common areas, such as maintenance and utility bills. In Queensland, strata title is also referred to as a community title or building unit title.
If a building has a strata scheme in place, it will also have an owners corporation. This is a board made up of other owners of strata title lots in the building, however in Queensland this can also be called a body corporate.
The role of this board of owners it to determine how much is paid by owners in fees, take out and manage insurance, keep administration records and maintain common property areas.
How does strata affect me?
As the owner of a strata title apartment or unit, you'll have a say in matters related to the building at owners corporation and body corporate meetings. You'll also need to adhere to a number of obligations, bylaws and guidelines set out by the board. For instance, this could be a no-pets policy in the building that you will have to enforce with your tenants.
As with any property, you will be responsible for any taxes and rates, however strata title dwellings have other costs, too.
Units or apartments that have a strata title will usually have a strata fee associated with the property. This will need to be paid by the owner on a regular basis and can range from hundreds to thousands of dollars, depending on the building. As it's an ongoing cost, it's important to determine how much this figure is before you buy the apartment to ensure you're making a good investment and it won't be harmful toward your capital gains.
This is when the assistance of a wealth coach can be of invaluable use. Not only will a wealth coach help you identify your financial goals, but they'll also help you create a strategy to get you there.