Apartments often provide an affordable entry into the property market for first time home buyers and investors on a smaller budget.
And though I own three apartments, I want to give you advice that I give to all my friends: Don’t buy a unit in a tower block or a high rise building which has MORE than four levels.
Let me explain why.
High rise apartments are owned by many landlords which is great for dividing major expenses, such as repairing the roof, fire and flood damages, etc.
Yet, larger problems can take longer to get resolved as the conflicting interests of other landlords need to be taken into consideration.
Worst, some landlords sell their apartments below the current market price because they need the cash urgently or want a quick sale. This devalues your apartment, particularly if you are selling at the same time, as the price of your unit needs to be relative to the other units in the same building.
It’s true, vendors of low rise apartment blocks can also sell below the market price. However, the probability of multiple properties owned by ‘desperate’ owners which are on sale at the same time in a smaller block is lower than a high rise tower block.
Furthermore, the more landlords you share your land ownership (freehold) with, the smaller your share of the land will be.
Remember, it’s the land that significantly increases in value over the long-term, not the bricks and mortar. Properties can always be built; land cannot be ‘built’ in dense urban areas.
“But what if I still want to buy an apartment in a tower block?”, you ask.
If you really want a unit in a tower block despite being aware of the risks, then go for it. It’s your money, not mine. But, let me give you five tips for buying a unit in a high rise tower block to minimise your risks:
- Befriend the other landlords so you can get them to vote on your agenda when problems arise.
- Look carefully at the layout of the apartment to see if a partition wall can be built to create another room. You may need permission from the building committee / strata.
- Only buy units with great views, such as sea and landmark views. This could make your apartment more expensive than the other units in the building and is a key selling point.
- Buy a new build. Its good condition will attract higher paying tenants.
- Make sure the tower block is within a 10-minute walk from the station and in an area which is undergoing gentrification. This will still add value to your property even if your neighbours sell below the market price.
Please note, though I own a few properties, I am not a legal, financial or professional property expert. I’ve written this post to share my personal experiences and would love to hear your opinions and views.
So, what are your views on investing in high rise apartment blocks?
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