7 HIDDEN Benefits of Strata Properties that will MAXIMISE Your Returns

Summary

In this video, Helen Taran discusses the dilemma between investing in strata versus freestanding properties. She compares the potential for capital growth and cash flow, using examples of two $2 million properties: a freestanding building in regional Queensland offering 7% return and a strata property in Melbourne with a higher 7.5% yield. Helen emphasizes the importance of considering long-term strategies and market conditions, suggesting that while regional land may offer stability, metro strata properties could provide greater growth potential and higher cash flow, especially when interest rates drop.

Takeaways

• 🏢 Investing in strata properties can sometimes offer better value and capital growth compared to freestanding properties.
• 🤔 The decision between strata and freestanding properties should align with your long-term investment strategy.
• 🏙 Commercial strata properties tend to have fewer maintenance issues compared to residential ones.
• 💼 In commercial strata, there are typically fewer residents to manage, leading to less nitpicking and lower shared costs.
• 📈 A strata property in Melbourne with a 75% yield might provide a higher cash flow than a freestanding property with a 7% yield in Regional Queensland.
• 💵 Higher yields on strata properties can translate to more cash flow in your pocket, even when fully financed.
• 🏡 Freestanding properties with land might offer more potential for future growth and development.
• 🌱 Regional properties may have more immediate growth potential due to current market conditions favoring lower-cost areas.
• 🏙️ Metro areas like Melbourne might experience faster market changes and confidence, leading to quicker capital growth in strata properties.
• 💹 Capital growth in city areas can outpace regional areas over a longer investment horizon, despite the allure of land ownership.
• 🔍 It's crucial to consider the local market, economy, and rental growth when evaluating potential for capital growth.

Q & A

What is the main difference between investing in a strata property versus a freestanding property?

The main difference lies in the responsibilities and potential for capital growth. Strata properties often involve shared maintenance costs and potential headaches, while freestanding properties offer standalone land ownership and potential for greater capital growth due to land value.

Why might some people be hesitant to invest in strata properties?

Investors might be hesitant due to the perceived headaches associated with strata living, such as shared maintenance costs, responsibilities for communal areas, and potential disputes with neighbors.

What are the benefits of investing in a commercial strata property compared to a residential one?

Commercial strata properties are often better maintained and have fewer issues with 'nit-picking' compared to residential strata. They may also have lower costs associated with communal areas like pools and lifts.

How does the yield compare between a freestanding property and a strata property in the given example?

In the example, the freestanding property in Regional Queensland offers a 7% return, while the strata property in Melbourne offers a higher yield of 7.5%.

What factors should an investor consider when choosing between a freestanding property and a strata property?

Investors should consider long-term strategy, potential for capital growth, cash flow, the local market, and the type of property (commercial vs. residential) when making a decision.

What is the significance of the property's location in terms of potential capital growth?

The location can greatly affect capital growth. Properties in metropolitan areas may experience faster growth due to higher demand and economic activity compared to regional areas.

How does the current interest rate environment impact the decision between a freestanding property and a strata property?

In a high-interest-rate environment, the positive cash flow from a strata property can be more attractive. However, when interest rates drop, the potential for capital growth in a freestanding property might become more appealing.

What is the role of land ownership in the potential value of a property?

Land ownership can add value to a property due to the potential for future development and appreciation of the land itself. However, it's not the only factor, as demand and local market conditions also play significant roles.

Why might an investor prefer a freestanding property in a regional area over a strata property in a metropolitan area?

An investor might prefer a regional freestanding property for its land ownership, potential for greater capital growth, and a secure government tenant, which can offer stability and long-term cash flow.

What is the importance of due diligence when investing in strata properties?

Due diligence is crucial when investing in strata properties to understand the specific responsibilities, costs, and potential issues associated with the property, including maintenance, levies, and the condition of communal areas.

How can an investor maximize their return on investment in commercial property?

An investor can maximize their return by understanding market trends, choosing the right type of property (strata or freestanding), location, and working with a professional team that specializes in commercial property investment.