Apartments, townhouses and villas can make attractive investment properties, but owning within a strata scheme comes with an extra layer of responsibilities.
As a landlord, you are not only managing your individual property and tenancy. You also need to understand the rules of the strata scheme, where responsibility for maintenance sits and how decisions made by the owners corporation could affect your investment.
Here are some of the key things to keep in mind.
Understand what belongs to you and what is common property
One of the biggest differences between owning a strata property and a freestanding home is that you do not necessarily own or control every part of the building.
Your lot generally includes the space within your property, while shared areas and certain structural elements form part of the common property managed by the owners corporation.
This distinction becomes particularly important when something needs repairing. A problem with an internal fixture may be the owner’s responsibility, while an issue involving common property may need to be addressed by the owners corporation. Exactly where responsibility sits can depend on the strata plan and the nature of the problem.
For landlords, the important thing is to identify who needs to act quickly rather than allowing an issue to sit unresolved while responsibility is being established.
Make sure you know the by-laws
Every strata scheme has by-laws that set out rules for residents. They can cover matters including parking, noise, pets, smoking, balconies, common areas and renovations.
Importantly, these rules also apply to your tenants.
In NSW, a landlord or real estate agent must provide tenants with a copy of the strata by-laws before they sign the tenancy agreement. If the by-laws change during the tenancy, an updated copy must also be provided.
Being familiar with the by-laws yourself can help you answer tenant questions and address potential problems before they develop into disputes.
Factor strata levies into the cost of ownership
Strata levies contribute towards the running and maintenance of the scheme. These generally include contributions to an administrative fund for everyday expenses and a capital works fund for larger future repairs and improvements.
As an investor, your existing levy should not be viewed as a fixed expense that will necessarily remain unchanged.
Large repairs, upgrades or unexpected building costs can lead to higher levies or special levies. The financial health of the scheme can therefore have a meaningful impact on your overall investment costs.
NSW strata schemes are also required to prepare a 10-year capital works fund plan to help anticipate major future expenditure. Reviewing this information can give you a better understanding of what may be coming.
Know what happens when repairs are needed
Repairs can become more complicated in strata properties because the landlord, owners corporation, strata manager and sometimes neighbouring owners may all be involved.
For example, water entering your property might originate from common property or another lot. Your tenant, however, will generally contact you or your property manager first.
Even where the owners corporation ultimately needs to carry out the repair, your property manager may need to coordinate with strata, arrange access and keep the tenant informed while the issue is being resolved. NSW rental laws also continue to place maintenance obligations on landlords, so a strata issue should not simply be passed on and forgotten about.
This is where proactive follow-up can make a significant difference.
Check before renovating
Renovating a strata property can require more planning than renovating a freestanding home.
While cosmetic work such as internal painting may not require owners corporation approval, other renovations can. Works affecting common property may require formal approval and, in some circumstances, changes to the scheme’s by-laws.
Before committing to a renovation, make sure you understand both the strata requirements and any approvals you need. This is particularly important when improving an investment property between tenancies, when delays can also mean lost rental income.
Pay attention to what is happening within the scheme
It can be tempting to pay the quarterly levy and leave everything else to the strata manager, but landlords can benefit from staying informed.
AGM notices, meeting minutes, proposed works and strata correspondence may flag issues that could affect your property.
Upcoming building works could affect tenant access or enjoyment. A proposed special levy could change your investment costs. Planned upgrades could also improve the building and potentially strengthen the appeal of your property over time.
Understanding what is happening within the scheme gives you more opportunity to plan ahead.
Property management and strata management are different
A strata manager works for the owners corporation and looks after the broader strata scheme. Your property manager works for you and manages your individual investment and tenancy.
The two roles often need to work together.
When maintenance involves common property, building access needs to be coordinated or a by-law issue arises, good communication between your property manager and strata manager can help keep matters moving.
Your property manager should also continue to monitor the things that sit outside strata management, including your lease, rental value, routine inspections, tenant communication and the condition of your individual property.
Proactive management matters in strata too
Owning within a strata scheme means some parts of your property sit within a broader structure, but that does not make proactive property management any less important.
Knowing the by-laws, understanding who is responsible for repairs, monitoring strata activity and responding quickly when issues arise can help you protect both your property and your relationship with your tenants.
If you own an apartment, townhouse or villa on the Northern Beaches and would like greater support managing your investment, speak with the JDH Real Estate property management team about how we can help.
