Looking high and low for investment opportunities
July 8, 2014 / Written by Rich Harvey
Thinking about investing in high-rise apartment units? You may want to think again.
Not all apartments are created equal, and it's up to investors to determine which type of units make the most sense for them. While the gleaming glass of high-rise apartment buildings may get you thinking about investing in a luxury penthouse, it's important to weigh up your options first.
Many high-rise apartment blocks are in high demand throughout the country, and one look at the skyline makes it easy to see why. Who wouldn't want a glorious view in the heart of the city?
At the same time, it's important to remember that demand doesn't always translate to high returns for landlords renting out a property.
First, high demand has led to high-rise apartments going up everywhere, meaning greater competition with other landlords.
Next you have to consider how such buildings will affect your bottom line when it comes to corporate body fees. The larger the building, the more shared spaces there will likely be. In turn, this can lead to higher fees for the maintenance of these areas.
Even the glamorous amenities that inspire demand from consumers can count against you. A pool and gym may mean a larger pool of potential tenants, but it also likely means higher strata costs for you.
A low-rise apartment complex may not be able to compete with high-rises when it comes to views, they do provide investors a number of advantages.
First and foremost, it can be easier to obtain financing for smaller apartment blocks. Some lenders will put restrictions on loans based on the size of an apartment complex. If too many units are in the development, you may find yourself with stricter loan-to-value ratio requirements.
Additionally, the strata costs are typically lower for low-rise apartment complexes, as there's less space that needs to be maintained.
Which type is right for you will come down to a number of factors, including the type of investment you're looking to make, as well as where it's located. Keep in mind, however, that a qualified buyers agent can help you select the right unit for your needs no matter your strategy or location.