Should you Invest in a Strata property? Top 5 Pros and Cons

Strata has become a lot more popular as of recently. A lot of investors are buying into strata schemes without first educating themselves on how they work.

It’s important to know all the benefits and downsides to owning a strata lot before you decide to invest in one. Here are some key things that set it apart from other kinds of properties.

1. Owners and investors may differ

The way strata schemes are managed leads to some very unique situations. The apartments themselves are called “lots” and they include everything within the four walls that make up the apartment. Everything else in the building is called common property.

Lot owners have ownership over individual lots, while the common property is under the jurisdiction of body corporate.

This is where things get complicated. Body corporate is a legal entity that includes all the lot owners in a building. Together, all the lot owners make decisions that affect how the common property is taken care of. This is often done during body corporate meetings.

Lot owners that simply want to invest in the property might not be present for the decision-making process. Because of this, they often have to consult body corporate to find out whether or not they’re allowed to renovate or improve on the property. Attending these meetings can be a chore, but avoiding them leads to more issues down the road.

2. It’s a numbers game

One of the many benefits that strata schemes provide is a lower barrier of entry into the real-estate market. The prices are much lower than those you might find for other apartments or houses. The general consensus is that strata properties are the most affordable way to invest in real estate.

The owners corporation mandates that lot owners pay levies to maintain the common property. Strata property levies can reduce the amount of money you pay for the overall property, but they’re often very costly on their own.

This can put a dent in your monthly earnings. It won’t come close to the amount of money you save from buying into a strata scheme, but it’s still a cost you have to take into account.

3. Maintenance should be simple

Strata schemes have the best potential when it comes to building management and maintenance. It is the duty of body corporate to maintain a well-run and aesthetically pleasing building. It’s in the best interest of every lot owner that the building is in good condition because that will increase the value of all the individual lots.

Unfortunately, not every strata scheme is run competently. You will often have absentee lot owners that count on other lot owners to take care of everything. If no one is invested in the building, it’s not going to be well-maintained. This often happens in either very large or very small strata schemes where there’s very little communication between lot owners.

4. There’s a different set of rules

Strata schemes have a very specific set of rules that are called “by-laws”. These rules aren’t legally binding, but they serve as a way for body corporate to enact the will of lot owners. Whether or not you can have pets in your apartment or smoke inside it depends on the by-laws of your strata scheme. They also affect how you can renovate your apartment.

By-laws can’t be draconian in nature. They don’t supersede state laws and they can’t discriminate against protected groups. This doesn’t mean that body corporate won’t try to create laws that overstep boundaries.

New owners that find by-laws to be too harsh often consult legal experts like Eling Strata Management to give them insight into what body corporate can and can’t do. As a lot owner, you have legal rights that can’t be taken away by small council rules.

5. Conflict resolution is streamlined

As is the case with any kind of property, you will occasionally have issues with your neighbours. They might disagree with the way you run your property or the changes you want to make to it. However, unlike other types of property management schemes, strata has a well-established conflict resolution process.

Complaints are sent through body corporate and they’re reviewed by all the other lot owners. If both sides of the dispute have legitimate arguments, it might come down to a vote from the lot owners.

This often leaves one party dissatisfied and they will probably want a second opinion. If things get heated, body corporate can employ the services of a mediator to help resolve the dispute.

Conclusion

Strata schemes might seem complicated, but they’re much like any other kind of property management system. The key difference that investors see is the lower price and potential for massive growth in the coming years. If you can tolerate going to meetings with fellow lot owners, strata will prove itself to be a good investment.

Bio

Liam Smith is a young and aspiring Australian blogger with a passion for everything related to home, design and lifestyle. He has a B.Sc. in Interior design and is an avid reader.

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