Small but mighty - why you should be investing in an apartment

While securing a slice of land with your real estate has traditionally been a favoured Australian approach to investing, with the Australian population rapidly on the rise and apartments often offering unbeatable locations and access to amenities and infrastructure, their popularity as a place to call home is soaring. 

And as a result, whether you’re hunting the elusive passive income, building a retirement nest egg, or simply looking to dip your toes into the world of property investment, new build apartments have plenty on offer to investors of all types. Here are the benefits you can expect:

Reap the rewards of future demand

The shape of households in Australia is changing. Australian Bureau of Statistics (ABS) data projects that lone-person households will rise from 2.3 million to between 3-3.5 million from 2016 to 2041, and single-parent families will also increase. And according to the Australian Institute of Health and Welfare, these household types tend to have lower homeownership rates – meaning an increased need for smaller rental properties like apartments.

How much will I need to pay?

While the amount paid in stamp duty varies widely between different states and territories, the cost ranges between 3-6% of the property’s total value on average. For example, if you’re purchasing a million-dollar property, stamp duty could be anywhere up to a whopping $60,000!

It’s important to factor in this expense when preparing your finances; otherwise, you can quickly become over-committed. Try this handy stamp duty calculator to see how much you could be liable for.

Benefit from affordability

Property tends to be on the expensive end of the spectrum when it comes to investment options, but apartments can act as a perfect (more affordable) opportunity to get a foot in the door. With the generally lower outlay, you’re also reducing risk and potentially opening yourself up to building a portfolio of multiple assets – depending on your budget; you could buy two apartments for the same price as one house!

Take a closer look at the financial factors you need to consider in our blog, how new builds stack up for property investors

Minimal upkeep

Stamp duty isn’t always straightforward, which can sometimes work to your advantage. With no sprawling lawn to care for, hedges to keep trimmed or fences to regularly paint, choosing an apartment as an investment comes with little to no maintenance woes. Body corporates take care of shared maintenance in apartment complexes, freeing you up to focus on expanding your portfolio.

With a newly built apartment, you’ll have the added benefit of the property and its fittings being covered under warranty – meaning you’re unlikely to be out of pocket with failing hot water cylinders or other costly repairs for years to come.

It is physically secure

Gated keypad entry points, security cameras, secure parking and proximity to neighbours mean apartments generally have fewer security issues than their stand-alone home counterparts. This means your tenants feel safe, and you’ll have peace of mind that your investment is secure.

Instant renewal appeal

A newly built apartment in a desirable neighbourhood is unlikely to sit on the rental market for long – which can make all the difference when you’ve got a mortgage to pay on your investment. Read more about choosing the right community for your investment property in our blog, how new builds stack up for property investors.

Another benefit of new build investment properties is that they’re built in compliance with current building codes – meaning they’ll be rental ready, unlike some of its ageing, well-worn counterparts that need new ventilation and heating installed to meet state rental requirements.

Upfront financial flexibility

Typically, just a 10% deposit to the developer is needed to secure a new build apartment, with the balance due once the property is completed. This means you won’t have mortgage payment commitments until your apartment is at the stage where it’s ready to rent.

You'll appreciate depreciation

With a new build apartment, investors can claim depreciation on the build itself and any fittings. Many investors overlook this huge tax benefit, so it’s important to speak to a property accountant to get across the intricacies.

The hardworking choice for astute investors

Apartments really are a small but mighty choice for all types of investors. And with demand for smaller rental properties pegged for future growth, the benefits of adding an apartment to your investment portfolio are likely to only increase over time.

To help you with the next steps on your property journey, download our free eBook, Your guide to buying an investment property. It’s packed with practical tips and valuable insights into find your perfect property match.