Before you look for a brand new home, you’ll need to prepare yourself financially. Buying a new home can be expensive, so it’s important you plan ahead as best as you can.

There are many expenses to factor into your budget, including the deposit, stamp duty, strata fees, and inspection and valuation costs.

Building Insurance

When you’re spending your life savings on purchasing property it makes sense to protect it. While building insurance is a compulsory requirement from your lender, there are other insurance policies that you should consider.

For example mortgage protection insurance will ensure your mortgage repayments are met should you fall seriously ill. Income protection insurance will also help pay the bills should you be hit by an accident, major trauma or illness.

Legal Help

Buying a home is fundamentally a legal process so the help of legal experts, namely conveyancers and solicitors is critical. They will be an invaluable part of property negotiations and can help you through the paperwork. However remember they will charge a fee so make sure you factor this in. Some conveyancers will charge a flat fee while others will charge a sliding fee based on the properties sale price. Make sure you discuss fees and charges before you engage their services.

Building, Pest and Strata

Having a building and pest inspection carried out on any property is usually a requirement by the lender but they are well worth investing in regardless.

If you are considering purchasing a unit or apartment, it is also in your best interest to have a strata inspection conducted – that is a report on the assets, liabilities and financial position of the apartment complex.

While having a building, pest or strata inspection completed on the potential property will cost you initially, it could be an invaluable safeguarding against buying a lemon.

Expect to pay around $400 for a building or pest inspection and around $200 for a strata report.

Council Rates and Strata Fees

Once a seller hands their property over, you immediately inherit all of the attached council and strata fees.

While both owners of houses and units are obliged to pay council rates, it is only owners of units or apartments that will have to incur strata fees.

Strata fees cover the property’s grouped maintenance and building insurance fees and are collected by the building’s owners’ or manager. These fees are ongoing costs that will continue to absorb your finances, generally quarterly, even after your initial property purchase payment, so it’s important to incorporate these into your ongoing budget.

The scope of strata fees will vary considerably depending on the age of the building, facilities, and location but you should expect to pay around $70 to $80 for the lodgement of application.

Having a Little Bit Extra

You may have done all your research and been prepared for all the major hidden extras, but you should always set aside a little bit extra for those expenses you are not expecting.

Expert tips

Real estate expert Andrew Winter, suggests choosing an apartment in an area where the unit features something unique to what houses in the area offers, such as water views, closer proximity to the station or other amenities*.

He also stresses the importance of choosing the right location, “Apartment living in outer suburban locations and rural areas is just not the norm. When something is not normal in the housing market it is often not sought by buyers” or renters for that matter. Inner city and urban locations are preferable for renters and future buyers and he believes should be considered as the preferable option by investors.

Be aware of the fees

Once a seller hands their property over, you immediately inherit all of the attached council and strata fees.

Strata fees cover the property’s grouped maintenance and building insurance fees and are collected by the building’s owners’ or manager. These fees are ongoing costs that will continue to absorb your finances, generally quarterly, even after your initial property purchase payment, so it’s important to incorporate these into your ongoing budget.

Understand the ratio of renters vs owner occupiers

The more central a building is the more popular it will be with the rental market and as an investor this can be positive. However, if the whole block is rental stock, it can affect demand. Tenants have more choice putting the power in their hands to negotiate on the price. Try and find out the ratio of renters to owner occupiers.

Orientation

Property experts agree that buyers should look for an apartment with light, views and practicality. In addition to that Andrew Winter suggests buyers “avoid units with no outlook or those that look on to air conditioning condensers or a solid brick wall” if you own a property like this expect the price to allow for this negative as many buyers won’t consider this aspect no matter how cheap.

What level is best?

Experts also suggest not paying a huge premium for apartments on higher floor in high rise buildings. Many renters and future buyers don’t like being over the 5th or 6th floor. Whilst young professionals may love a view from up high – they may not love being blown away every time they step outside.

If you’re looking at an apartment in a quieter suburb, your tenants will most likely be young families or empty nesters. These tenants often look for easily accessible but safe, smaller apartment blocks with a unit of the first two floors.

Outside space

Property expert Andrew Winter suggests that whenever possible you should buy an apartment with a balcony or terrace and ideally ensure it is big enough to put a table and 2 chairs. It offers a huge bonus to the people who live there and makes your property more popular for renters and buyers down the track.

Apartments are becoming increasingly popular in Australia and if you’re careful with your investment selection and pay the right price they are very popular with renters and can pay dividends in the future when you go to sell.

There is a whole generation of people leaving home or migrating to Australia who are looking at apartment living as their preferred choice. Buying an apartment as an investment is as safe as houses – if you buy the right one.