Buying An Apartment First Home
Many first home buyers choose to buy an apartment first, before committing to a larger family home. Not only are apartments are generally more affordable, you're building equity for the future with a place you can live in or rent out right now.
Buying an apartment is a bit different to purchasing a whole house. With significantly less space available, you want to make the most of every inch.
To give you the right advice to make a smart apartment investment, here's some information from a real estate agent on the apartments that offer the best return on investment.
9 Key Features For Your First Apartment Home
Purchasing any property, even an apartment, is a huge committment, so you want to make sure you've thought it through thoroughly. Once you've decided that an apartment might be a great option for you right now, the decision making has only just begun.
To help you to make the right purchase, we consulted a panel of real estate agents to find out what features add the most value to an apartment.
1. Size of the Development
Depending on the area that you are looking to purchase in, buying an apartment that has fewer units in the one development is usually going to be a better investment in the longer term.
Smaller developments give occupants increased privacy, as well as making property maintenaince easier in the long term. Banks are also starting to view large developments as higher risk, especially where the apartments themselves are small.
If you're buying off the plan, see if you can get access to a virtual inspection of the property before you commit to get a realistic idea of what the space will be like.
With the right research, you can make a great investment in an off-the-plan property, but make sure you read the contract carefully, and that the specifications of the property you're considering fit within the lender's guidelines. When you apply for a home loan pre-approval, discuss all of your plans with your mortgage broker so that you're approved for the best loan product for your purchase.
2. Location, location
Choosing a location that's near parks, schools, public transport and shopping centres has a huge impact on the property value growth.
A well-located apartment with great access will be a lot nicer to live in. Unlike a house with a backyard, apartments have less space, so being able to access local parks and recreational areas will make a huge difference.
If you're going to live in your new apartment for now, a great location will make the property much easier to rent out or sell when you are ready to move on.
3. Street appeal
There's a high demand for well-presented apartments. Finding a property on a leafy street in a central location will attract busy young professionals, as well as older people who are looking to downsize their homes.
Another key advantage to apartment living is that there's a lot less cleaning and maintenance to be done, so it's great if you have a busy lifestyle and you're not spending too much time at home. A smaller property usually means your bills will be cheaper too, with less space to heat, light and cool.
If you find well-designed unit in a quiet location, close to parks and retail, you'll be making a great investment. The property will be attractive to renters and to buyers, giving you more options in the future.
Don't forget about extra value-adds like solar panels, a solar hot water system. Going the extra-mile to be eco-friendly, you may look for energy-efficient appliances to reduce the carbon footprint of the apartment and appeal to the environmentally conscious.
Features like this will set you up for property value growth as sustainable living gains popularity.
4. The Neighbours
If you're looking to buy an apartment, you'll find that the neighbours have a much bigger effect on the property's ambience than they would in a house, simply because of the much closer proximity.
As most developments are managed under a strata, owners who live in their properties are more likely to be better engaged and aware of the issues that need to be addressed by the community.
Neighbours who own the apartment they live in are also likely to take much better care of the property, and over time, this will reduce your total maintenance costs, whether you're planning to live in the unit or rent it out.
It will pay to do your research and to get a good idea of the area where you are purchasing. If you can, aim to buy in a development with a 70:30 ratio of owner-occupiers to investors.
5. Sound construction
Before committing to buy a unit or townhouse, make sure you get a professional building inspection. This will give you peace of mind that you know about any major repair costs that could fall due, and that the property is in a good conditions. Don't be afraid to ask the building inspector any questions you have about the property to get their expertise on your potential purchase.
If the property you're looking at is a bit older, you should also be sure to check that it has reasonable ventilation and acoustics.
The last thing you want is to move into your new place, and discover that you can hear every move the neighbours make. Doing the right research, you'll be sure not to make a hasty purchase that you might come to regret later.
Another aspect of the construction to consider is the 'flow' of the property. In a small space, you want to be able to complete your daily tasks and move throughout the space easily.
The orientation of an apartment, or a townhouse, has a huge effect on the temperature regulation inside the home. In Australia, you'll ideally want to have north-facing windows so the temperature fluctation throughout the day is kept to a minimum.
This is something to look for particularly in old homes, so pay attention to where the light is coming in when you inspect the property.
As well as good natural light, the ideal apartment will be naturally well-ventilated.
7. The Space
The primary compromise with choosing an apartment over an entire house is that you're working with a much smaller space. This makes the design and availablilty of storage even more important.
When buying a unit or townhouse, don't underestimate the value of built-in robes, cupboards and drawers.
Some lenders have requirements about the minimum floor space they will settle a loan for, so find out what your lender will allow, or talk to your mortgage broker about the details of the apartment you're considering.
Particularly when buying off the plan, try to look for an apartment that is greater than 80 m2, or greater than 110 m2 for a 2 bedroom apartment.
If you're buying in a small development, there are advantages to choosing a ground floor unit for better access. This will keep your options open, making it more suitable for future occupants such as young families or older people.
Your choice of apartment floor level will really depend on what you like too. If you're city-centre, high rise apartment type of person, if you later decide to rent your target market will be young, like-minded professionals, or students looking for a central location with great views.
8. How many rooms?
If you're buying a place for yourself to live in, you may only need one bedroom right now. However, it does pay to think ahead, and if you can afford it, it might be good to get a little extra space.
Having a spare room can be really useful as a study or home office, to expand your living space or to use as extra storage space. It's also nice to have a guest room if you have visitors too.
When you're buying in a prime location, a smaller apartment can be offset by the location. Whether you're living in the unit yourself or renting it out, if you're close to parks and retail, you're more likely to spend time outside your home.
If you're looking for a great investment, as well as somewhere to live right now, you'll want a smaller apartment to be offset by the location - schools, universities, work and so on.
If you get a magic location like this, one bedroom will work well. However, if you can afford it, you should look at purchasing a 2 bedroom property, with 2 bathrooms.
This allows your potential future tenants to share, and has greater owner-resident resale appeal which could fetch you a higher price when you are ready to sell.
9. Car space
Having a designated car port or car parking space adds value to any apartment, particularly if you're in a busy area.
As well as having the convenience of a guaranteed parking space, you might even be able to lease you're car space when you're not home during the day.
You'll also benefit from an extra level of protection for a nice car that's a bit better than on-street parking. This makes the property easier to rent or sell, and much more convenient to live in.
Is apartment ownership for you?
If you don't want to take on the committment of owning an entire house, an apartment might be the right way for you to get into the property market.
Other perks of apartment ownership are that you'll usually attract lower council rates. You might also get access to a gym and common outdoor areas, such as a pool, garden, or courtyard.
Buying an apartment means you'll need to work with the other apartment owners in the development to ensure the upkeep of the entire building. It's a good introduction to property ownership, as you aren't left on your own to manage all of the details. Your insurance will usually be included with strata levy that you pay too.
If there's any revonations that you want to do, you might need to seek permission from the strata group. The costs of renovations in an apartment are likely to be much less than they would be for a house though.
Be smart about your first property purchase
At the end of the day, a decision to purchase an apartment rather than a stand-alone home is a lifestyle decision as well as a financial decision. You'll need to consider which option fits in best with where you are in your life right now.
Being smart about buying your first home means that you should consider the demographic of population in the area where you're buying. If there's more couples, an apartment is a good choice, but if there's predominantly families and young children, buying a house will ensure much healthier capital growth for the future.
When you're making your final decision to purchase, bear in mind that the first home that you buy will not be the last home that you buy. You can afford to make a rational decision, rather than following your emotions.
Take advantage of the First Home Owner's Grant
In some States in Australia you can still get the FHOG when you're buying a brand new property, such as an off-the-plan apartment.
The catch is that to qualify for the grant, you'll need to live in the property yourself for a minimum time period, between 6 and 12 months, depending which state you're buying in.
Here's some more information about the current criteria for the first home owners grant for your state.
You could also benefit from savings on stamp duty when you're buying a brand new home.
Should you consider buying an apartment as an investment property?
Our First Home Buying Guide discusses the pros and cons of investing or buying an owner-occupied property as your first home.