The mile high club

The mile high clubSo, you’ve decided to look at apartments as an investment property. But which floor should you target and is this a better choice than purchasing a house?

In most of the world’s major cities, apartments on higher floors attract a premium. A view will add value, but it can be challenging to achieve a rent commensurate with the price paid for a high-floor unit. Buying on a lower floor could make it easier to get a respectable rate of return.

Some property commentators believe higher levels attract higher prices simply because they’re sold that way off the plan. Research by Brisbane-based property analyst Michael Matusik suggests apartments on levels three to eight sell more quickly and are held the longest.

According to Matusik, people like to recognise a human face from an apartment view because it makes them feel connected to the ground. They have that connection up to about level six.

The analyst group says the best value for money in high-rises is the level below the sewerage and water pipes. This is usually floor seven or eight, where the ceiling height is slightly higher.

At the lower level, there may be a courtyard view rather than a scenic view, but the courtyard unit may cost $400,000 compared with $480,000 for the same product upstairs.

With larger projects, the view from an apartment can be fundamentally the same on the 12th and 30th floors. You might miss out on the bragging rights associated with being on the top floor, but you’ll pay a lot less on the 12th.

A top floor still has plenty of pulling power. Most developers make apartments on higher floors more luxurious and spacious, which appeals to both renters and owner-occupiers.

Before signing a contract, it is essential to check the track record of the developer. You would never want to buy anything from someone with a murky history of lawsuits.

See whether the building is predominantly aimed at owner-occupiers or whether it’s an investment-based building. The telltale signs of an investment building are specifications for lots of 50-square-metre one-bedroom units, and two-bedroom units of 60 square metres or 70 square metres.

Know your area and demographic. Find out who wants to rent in the area. Is the property well suited to the people buying in the area?

Additionally, an advantage of high-rises is that some have offices, eatery and retail areas underneath, which can make them very convenient to live in. In fact, after a few decades of renting out the apartment for a profit, many investors even like to downsize to more practical living quarters and simply occupy the investment property after the final rent period is up.

However, apartment buildings do come with problems that a single house does not have. Due to the close proximity and number of people, noise and undesirables wandering into the building are common issues. And a poorly managed building can get a bad reputation quickly with social media these days.

What are your thoughts on investing in an apartment versus a house?


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