How to buy the perfect apartment?

Despite a softening of the overall property market, units appear to be holding up better than houses.

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Over the past few years, there was a clear drive towards larger homes with more space as people were forced to spend more time at home. Now that shift is unwinding and combined with rising living costs, units are again starting to look more appealing.

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The latest data from CoreLogic suggests that since the peak in April, house values are now reversing at a more rapid rate, while values across the medium to high-density sector have declined moderately units are looking far more resilient.

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So if you’re an investor and are looking at an apartment, what types of things should you be looking for?

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The first thing I always look for with an apartment is ideally that it is in a small boutique block. There’s no point buying into a large building with hundreds of units. You are at the mercy of the other owners when they buy and sell and it’s very hard to sell if you’ve got four other properties for sale in the same building. Typically, I would want to see a block of under 12-15 units and on a quiet street.

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I also think that having outdoor space is very important. If you’re looking at an area that features a lot of art deco apartments, then these won’t typically have any outdoor space because that’s how they are built. If you can get some sort of outdoor area that would be preferable.

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In a perfect world, you ideally want to have parking as well. If you haven’t got the budget to afford the parking component, I would probably look at the location of the building and the floorplan over the parking space.

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If the building has renovation potential, that can be a good thing as well as that gives you the ability to increase your equity by doing some small cosmetic changes.

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One of the most important things for investors looking at apartments is to make sure you're buying a unit in an area where people typically want that type of dwelling. In certain locations in Victoria or Brisbane, people simply don’t want to live in apartments. They want freestanding homes. It doesn’t matter how great the building is in those locations, you need to buy what the demographic in the area actually wants.

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Ideally, you want to be buying a two-plus bedroom apartment as well, becuase that allows you to appeal to a broader demographic. A two-bedroom apartment can accommodate, singles, couples, retirees, friends or even small families, so the level of demand should remain strong. Especially if you tick all the other boxes as well.

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Finally, you want minimal extras in the building. Things like lifts, pools and gyms are great, but the problem is you have to pay for them and it’s usually not cheap. If something goes wrong and you need to fix a lift it’s not going to be cheap. These higher costs mean higher strata fees and lower yields.

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Now is a great time to start looking at apartments again after all the focus of the past few years has been on larger homes. Just be careful to do your due diligence and make sure you’re buying the right product in the right location.