Townhouses are an increasingly popular avenue for investment as downsizers and budding investors shirk the allure of multi-storey towers and freestanding homes. With the supply of townhouses increasing year on year in Australia, their prices have also seen a nominal increase compared to freestanding properties. This frames them as an affordable alternative for those looking to invest within the property market so long as their benefits are weighed up against the goals and requirements of individual investors. So, what are the benefits of investing in a townhouse?
Value for money when investing in a townhouse
Many developers and builders now aim to build townhouses with affordability in mind, to attract investment, while also making the most of the land on which the developments sit. As an investor, while you should be vigilant by using a building surveyor to warn you of any structural issues of a property, such as thin walls that may have a negative effect on your resale price, townhouses often make the most of the land value by designing the property to have as much space and light as possible. Look out for common structural issues, such as water damage, bouncy flooring and cracks.
Second to this, townhouses can often be a relatively affordable way to enter the property market without having to sacrifice on your location goals. They are often located within the inner city, they often sell easily, however, they may not experience the same sort of capital growth that a freestanding property in the same area will.
Thirdly, demand for townhouses has often outstripped supply and this is set to continue with neighbourhood pushback against medium/high density living. This means existing and new townhouse owners can expect greater capital growth. For those investing in a townhouse that is off-the-plan, be sure that you are aware that if it is a split contract, in which the land and construction are paid separately, will your lender finance both payments?
Many townhouses, especially those with two or more properties within a development, are often sold with a strata title. This means that you agree to purchase a portion of an entire development. Secondly, you agree to contribute the fees necessary to maintain the development as a whole. These fees, called body/owner corporation/strata fees will increase with the more facilities your property has, such as a gym or pool.
The benefits of being a part of a strata corporation? You have more interaction with your neighbours (if you want it) and less physical work to do on the management of your property’s surrounds and shared spaces. Townhouses often have lower strata fees than multi-storey tower developments as they have less work involved in their maintenance and less for you to worry about.
Tip: be sure to read over your strata-title in detail. Be aware of what your fees cover and what the fees are in total, the frequency and extent to which they are increased, how issues are resolved and any upcoming expenses that could sneak up on you the second you move in.
Certain townhouses, especially those with more than two properties on the development, have increased security measures. It is in the interest of the strata corporation to maintain the security of the development, especially as far as its own insurance policies are concerned. Be aware that the costs of securing your property will most likely be passed on to you via strata fees.
One size does not fit all
Remember that there are a variety of strata-type townhouses in which to invest. Differing property types will suit a variety of investment strategies. Purchasing a townhouse as part of a two-property strata title will be different to investing in a 6-unit or multi-level building. Be sure to check what changes you can make in regards to renovations. For instance, what walls and features are shared and part of the strata title.
Sometimes the larger the number of properties within a title, the smaller your individual strata payments will be. However, larger titles may include amenities such as pools and gyms, as well as higher insurance costs that will inevitably be passed on to you. You need to have a clear idea of your financial constraints before investing in a townhouse.
While there are a variety of benefits to purchasing a townhouse, the biggest benefit should be its location. Avoid investing in a townhouse that is located in an area that won’t provide you with healthy capital growth.