Issues for body corporate investors to consider

There are a number of significant motivating factors behind body corporate investments.  

Strata-titled properties are usually a lot less expensive to purchase than a house, they require less up-keep and more often than not, include attractive common areas and facilities. With the long list of benefits, investors commonly perceive buying into strata title as a no-brainer decision and in the process, overlook key considerations. It is essential that buyers do their homework and are up to speed with the operations of their future strata community, particularly its financial situation.  

While some bodies corporate are well funded and have a closely monitored plan for the projected maintenance and upgrade requirements of their building, many fail to plan ahead and as a result, millions of investors find themselves faced with a body corporate debt.

Four of the biggest cost factors that transpire post-purchase, are water penetration, lift upgrades, painting and concrete cancer. Alongside general repair, maintenance and infrastructure expenses, they can make investing in body corporate property more expensive than first anticipated. Contributions, or levies as they are better known, include the administration fund that is usually the larger portion of funds and covers the day-to-day maintenance of the building and common areas within a body corporate scheme. The second levy, the sinking fund, is a reserve of money to which all owners contribute to pay for communal expenses such as painting the exterior or common interior walls of the building, driveway refurbishment, lift overhauls and replacement of common area carpets, roofing and guttering.

When serious problems arise, such as building defects and water leakages, it can be hugely frustrating for investors. When balconies start falling off and water floods through bedrooms, the situation can become untenable and the body corporate could be hit with additional fees to cover the damage. Furthermore, they are vulnerable to being sued if someone is injured because the repair wasn’t fixed quickly enough.

Investors should keep in mind that purchasing in a body corporate can be a long-term financial obligation and they should carefully consider what they want out of the investment before buying. If damage is caused and strata finance has been pursued by your body corporate be aware that it will add to your property maintenance costs and higher levy commitments can be unappealing to buyers if you plan on selling.

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