After inspecting hundreds of apartments and dealing with property buyers and sellers for 25 years here are my 7 Laws of buying an apartment. The laws are the same for buying an existing or “off the plan” apartment. And even if you are an investor and won’t live in the apartment, a tenant will pay you more, and stay for longer if your property ticks all the boxes. It’s vital to think about the future buyer and tenants to maximise rental and capital return.
There can be a lot to think about and weigh up so get advice from someone you trust.
Law 1 – Size Matters – When it comes to real estate of any description size matters and apartments are no exception. It doesn’t have to be huge, but bedrooms, BIR, living rooms all need to work comfortably. Think about the layout, facilities, natural light, and morning and afternoon sun. It can be hard to assess the size when buying off the plan and sometimes you need to ask for a scaled or dimensioned floor plan and get the ruler out.
Law 2 – Location Location Location – Don’t worry about primary schools or hospitals. It’s more about public transport, cafes, restaurants, bars, parks, employment, and universities. Somewhere people can live, work, play, eat, and educate, or can get to these places easily and quickly. Ideally apartment dwellers don’t need to use their car very often, or even better still, don’t have one.
Law 3 – Know your competition – What other apartments might be built nearby that would increase supply to your market and limit rental and capital growth? Or worse still, block your amazing view of the Bay or CBD. Look for large underutilised sites or ask the local council about any permit applications nearby. This one is a bit harder to figure out so ask an expert.
Law 4 – Do the numbers – For investors especially, understand what the total cost and revenue numbers are, and then take it all to your accountant to look at what the after tax return to you will be. If you’re holding the asset in an SMSF or trust structure, there are costs in establishing all this. When buying “off the plan” the costs and income numbers will be estimates so allow for some upside variation.
Law 5 – Take a 10-year view – Everyone who makes money out of real estate buys good property and holds it for a long time. Do your sums on owning the apartment for 10 years and allow for a few bumps along the way in terms of your own situation, the property and the market. Hopefully everything will be fine but if things change, you need to be able to ride out the storm.
Law 6 – Show me the money – Look around the market and compare the price of each apartment with what you get in terms of size, amenity, location, finishes, investment return, etc. When comparing “off the plan” apartments with existing, don’t be overly enticed by tax savings and new finishes. Compare the whole package and get help if you need it as there is a lot to consider.
Law 7 – Love thy neighbour – Look at the total building and what it is like, who lives there and how it is looked after. You or your tenant will be living together with everyone else in the building. Are there more tenants or owner occupiers, and how is the building managed? This is harder when the building hasn’t been built yet so think about its total size, apartment mix, and what type of resident is it likely to attract.