When it comes to buying and investing – a really good question to consider whether an apartment or a townhouse is a better choice?
Both property types will be a lot more affordable than a freestanding Torrens-titled house as both have been created through a process of subdivision and both are a part of an owners corporation.
The below graph from the Real Estate Institute of Victoria (REIV) shows the growth of houses vs units in Melbourne for the past 5 years:
Rental Yield and Rent Prices
According to the REIV, the median rent in Metro Melbourne as at the end of March 2021 was $480 per week; giving a rental yield of 2.7%.
The data as presented by the REIV also shows that the number of bedrooms is a large factor when it comes to the rent that investors receive and that tenants are willing to pay:
Apartments vs Townhouses: Other Factors & Considerations
- Townhouses are often built with shared partition walls and many will have a yard at the back and garden at the front which can be a big drawcard.
- Townhouses will allow for investors to individually depreciate their building through obtaining a depreciation schedule.
- Apartments are more ‘set-and-forget’ for investors and tenants as the owners corporation takes care of all the cleaning, caretaking, gardening, and servicing of equipment/assets/facilities/amenities.
- Medium to larger apartment buildings will typically have a gym and a pool which can be attractive for prospective residents.
Owner Corporation Fees Are Often Lower For Townhouses
The owners corporation fees for apartment buildings in Victoria are on average $2,000 to $4,000 per annum whereas townhouse fees typically $1,500 per annum.
The biggest factors in how much the owners corporation fees (or body corporate fees) are the extent and types of common facilities and amenities (the lifts, pools, shared garage doors, essential services equipment, caretaking, gardening, building insurance etc.).
Body Corporate Fees / Owners Corporation Fees
Buying Into an Owners Corporation
Investors and homebuyers should always be mindful, regardless of whether it’s a townhouse or an apartment, that they’re not just buying a property but also buying into an owners corporation.
An Owners Corporation (formerly known as Body Corporate) is an entity in its own right and every single owner is automatically a member of that entity. The Owners Corporations runs the AGM, sets the budget, collects the levies, maintains the common property, renews the building insurance (including public liability and associated insurances), enters into services contracts, and conducts all other facets that relate to the building (that isn’t private lot owners’ property).
Need Help Reviewing the Owners Corporation Management for Townhouses or Apartments?
Due diligence and choosing carefully is important – have a read of this article for one example of where did things didn’t go right – Don’t Trust a One-man Band with Your Money (or Owners Corporation Management).
Strata Consultants specializes in advising and guiding Committees on how to change owners corporation management companies. Get in touch on 1300 917 848 or via email at firstname.lastname@example.org
The content in this paper is intended only to provide a general overview. It is not intended to be comprehensive nor does it constitute investment advice. You should seek professional advice before acting or relying on any of the content.