05 Feb Buying An Investment Apartment? What To Look For
When you’re buying an investment property you need to think beyond whether you like it or could live in it yourself. Here are some pointers on just one aspect you need to consider – the design of the building, its facilities and the apartment itself.
Design and fit-out of apartment
Remember, it’s not about the style you like yourself – think about the type of people who are going to be attracted to the area or and make sure the quality and style will appeal to them; whether they’re students, hip inner-city professionals, or holidaying families.
Kitchen and bathrooms are the most important rooms from a styling and fitout point of view. There are many different kitchen design‘s to choose from. They must be functional and well-lit. Imagine moving around in them. Look at the ‘triangles’ – in the kitchen, is it easy to move between stove, sink and fridge; what about between toilet, basin and shower in the bathroom?
In the city, at lower price ranges, any internal laundry facilities will do – a combined washer-dryer under the kitchen bench will be fine. At higher price ranges or if you’re buying in a beachside holiday location – there must be a separate laundry space that allows for separate washer and dryer and a tub.
Look for modern fittings, but nothing too “cutting edge” unless you’re prepared to update regularly or if you’re buying into a location where you’ve got to appeal to the trendy and design-conscious. The best way to be very ‘current’ is with colour on a feature wall – it’s quick, easy and cheap to repaint with a new fashion colour when you need to find a tenant.
Only in very specific circumstances will you get rental return that makes up for the extra cost of very expensive fitouts. Good, functional and modern is the standard you should aim for. Lavish benchtops, joinery, flooring and lighting will usually not deliver significantly higher rents.
Visit the website and think of maintenance – the everyday demands on your tenants, as well as the longer-term upkeep for you. Finishes – especially flooring, walls and benchtops must be easy to keep clean, hard-wearing and easy to replace.
Building style and amenities
The look and style of the building itself is critical for many inner-urban tenants. Think about the kind of people who live in the area and what might appeal to them and their lifestyles. The higher the price range you’re buying in, the more important building design is to potential tenants.
Bonus points for inner-city buildings that have a well-landscaped green space that apartments look onto and that residents can use to sit outdoors.
What building amenities you should be looking for depends on whether the location is suitable for long or short-term tenants, business people or holiday-makers. For the most part these days, inner-urban professionals have their favourite gym and swimming pool elsewhere and don’t look for those in their apartment building. In CBD locations, buildings that will rely on short-stay executive renters should have both a gym and pool. Families with older children will value a pool at their holiday apartment, even if it’s close to the beach.
And a couple of other considerations
Beware the levies. The more amenities in the building, the higher the strata levies are going to be. High-rise apartments with pool and gym now often have quarterly levies approaching the $2000/quarter mark. It can be even higher when there’s a concierge. That’s a lot of expense to cover in rent and you just won’t get the returns on those outgoings.
If you are buying in a building with short-term or holiday rentals, check two things: likely occupancy rates and management fees. In Calgary property manager fees for 6-12 month leases are generally 5-8% (plus one or two week’s rent per lease), management fees for short-term rentals can be up to 25% of the rent. Do your sums.
Think about how the building and its style appeal to local residents, not just investors, and especially not just interstate and overseas investors. For example, some buildings are developed specifically with the foreign investor market in mind, which (because of Foreign Investment Review Board requirements) can present a real problem when it comes to resale.