Okay, in reply to the many emails we received from yesterday’s missive, here are some of the design-related things that buyers should consider when buying an apartment (and other attached product like townhouses) before construction has begun.
- The fewer apartments in a complex the better. This reduces the number of stock for resale at any given time. For larger developments, select a project with a wide variety of apartment designs. This, too, helps when it comes to resale. It is quite common to have one in every ten to twelve apartments or townhouses in a complex up for resale at the same time.
- Beware of all the shiny new toys. A good foyer or useable public gathering space is important, as such space doesn’t often exist on individual floors or in the apartments themselves. And apart from anything else, allowing guests and others to gather in the complex proper might annoy other residents and could become a security issue. On that note, it is important to have a functional security system and good phone/internet access. But the other things that are often included in new medium and high density projects – the pools, spas, saunas, gymnasiums, theatrettes and party rooms – catch buyers but not necessarily more rent.
Some things work well, such as snooker tables in student accommodation, but most amenities end up costing the owner money, and often lots of it. Ask yourself: Will the target tenants actually use the facilities? Our experience is that most won’t. Nor will they fork out more rent for them either.
- The way to get more rent and a better return in an apartment or townhouse complex is to buy product that can be more easily shared and has some half-decent storage. The key to sharing is equally sized and positioned bedrooms, each with their own ensuite. For one-bedroom apartments, they need to be designed so that a couple can comfortably live in them. Secure basement storage is often not supplied but can be in most new projects. Tenants will pay up to 5% more per week for such storage.
- Often the best-designed apartments or townhouses are simply a square or rectangle. This allows each room to get as much natural light as possible. This, in turn, increases the perception of space – remember, apartments and townhouses in general are tight in terms of floor area – so buying a design which makes the dwelling look larger than it actually is pays dividends. This can be done when the ratio of glass to solid wall is high; the ceilings are higher than standard issue; the bedrooms are sized to accommodate a queen-sized bed and there is little dead space, such as long hallways. Alfresco areas (enclosable balconies for all of us plebs) also make apartments more usable and spacious. So too, somewhat ironically, does a framed view rather than an expansive one.
One of best ways to get more space in an apartment is to get in early and buy the product immediately below a change in the apartment floor plan – say at level eight, for example, which might have ten apartments per floor whereas level nine drops down to six apartments per floor. Why? – because the apartments on level eight will have higher ceilings to allow for the change in blockheads. I know of many repeat investors who have made tidy profits from this buying strategy alone.
- Finally, it pays to have a separate laundry, a galley kitchen (even if it is small) and some secure off-street parking. Also, and although it costs more initially (and remember it can be depreciated too), furnished apartments these days are popular with tenants and the rental premiums can be very good.
It also goes without saying that density needs to be off-set – so medium and high density developments are best located near public transport and places of work, and also within close distance to leisure precincts and quality public open space.
Now don’t be shy…we can help you make your new residential project work much better, from inception, through to sales and even settlement. Give us a call 07 3720 9988 or email me. We work anywhere and anytime – well my staff will. Seriously, we can help.
If you want to keep your comments private and confidential contact me directly on michael@matusik.com.au
It is probably worth making a comment here on buying an apartment for short term letting, although you have probably covered that before elsewhere.
In my experience in the commercial property world, we would buy hotels on a yield or passing cap rate that reflected the inherent risk in short term letting to the corporate or leisure markets, somewhere around 8-9% for CBD assets, and probably 10%+ for holiday lets. Compare that with the 4-5% yield that residential property investors (ie, Mums and Dads) pay for the same product. In effect, Mums and Dads are paying a higher price to the developer based on a residential risk profile, for a property that actually has a completely different risk profile and would be around 20-30% less in value to a sophisticated, commercial investor.
This is why developers continue to build these things and flog them to Mums and Dads. This is why they have to throw in rent guarantees. This is why most investors in these products hate their property manager, who has bought the management rights and cannot usually be replaced by the owners.
Steer clear of short-term letting properties unless you are buying them at a price that properly reflects their risk.
good points – 100% agree