How do you pick which apartment to invest in?

Okay, so you’ve decided that you want to buy an apartment as an investment so the question is, which one do you pick? And I think it’s no secret to anyone who had been watching my videos for a long time now or even listening to The Property Couch podcast; they know that I am not a fan of medium to high density off the plan apartments. But there are some apartments that I’m very comfortable in investing and typically it’s the old school 1960s or 1970s apartments or even the 30s art decos. They are older apartments that are in the better locations that don’t have the expensive amenities of a pool, caretaker and a lift. If you’ve decided that that is the apartment that you want to invest in, the question is how do you determine which one to pick? So in this How to session, I want to give a list of things to think about, and the nirvana is you get each of this lined up but the reality is, you would probably only get three or four at best. It’s important to try and get as many as these covered in your decision-making process as you can to secure an investment grade apartment.

The first is I always look for privacy. If you think about it in the worst context, you think about high rises. There are so many people in the block and that balcony is looking at another balcony which is looking at another balcony, and it becomes sort of a fish bowl. But in the older style they are a bit more boutique in nature because there aren’t so many in the block. It’s not often that you would look at each other, but it’s critical that you have a look at what your living areas are going to be looking into. Because if you are looking into a big ugly wall or in fact, you might have another apartment block next door and you could be looking into their balcony, and it’s not as great in terms of privacy. Versus if you are overlooking a beautiful garden or maybe at the front of a block, overlooking the street, getting that sort of street frontage. Those are the sort of things that I’m looking for because I’m living in a community environment which is fine because the tenants are going in with their eyes wide open. But within that community environment if I can provide as much privacy as I can that’s going to make that particular apartment more desirable, have more owner occupier appeal and ultimately help you perform better in your property portfolio. So number one thing that you need to look out for is privacy.

The second thing that I look for without a shadow of a doubt is outdoor space and the minimum is a balcony. Now I have actually bought properties in the past where there isn’t a balcony. Where it’s ginormous inside and the climate has been ok for us to do that. But generally speaking, I like to have some outdoor space and at the very least, it would be a balcony. And I want that balcony to be usable. Again, it’s not going to be massive, but I want to have a small table and small chairs so that on a summer’s night if I want to sit outside and eat my meal, have a drink or just chill out, I can. I want to be able to escape the four walls internally and that can only come from having that living space.

The other obvious one is if you can get it, get the ground floor with a really nice courtyard which then gives you the opportunity to feel like you’ve got more space and a perfect scenario would be if you can get that land or courtyard on the title.

For me, that’s critical but equally, I want it to be accessible from the living area. The alternative is it’s accessible from the bedroom and that’s ok for you. But what if you’ve got a friend over and you want to have a glass of wine on the balcony and have a bit of a chat and talk about your day? You’ve got to take them through your bedroom to get to that balcony and that’s not as desirable. So really what we want to do with these criteria is pick things that would give them the broadest appeal and the more lifestyle within this community living environment. Therefore when it comes time to revalue or if it comes time for a ‘For Sale’ sign at the front at some stage, you are going to get the maximum value that you can from that property.

The third one is natural light. Look for the aspect. If you are next to something that is just going to shade that northerly sun and you are in the southern climate where you want that. That is not as good as compared to if the living area allows for that beautiful northern light to come through. So it’s really important that you get that. And the higher up that you are, obviously the more benefit that you get from that natural light but it becomes a bit of a trade off because on the ground floor you get a big courtyard versus being a bit further up, you get a bit more light. This one is always harder to compromise because, for example, some female would prefer to be on the 1st or 2nd level because it provides some form of security. So there is no definitive answer to this, but ultimately, you want to be maximising the amount of natural light that you can get when you are buying one of these apartments.

The fourth thing to look for is the proportion of the rooms. For me, I like them to have three metres by three metres as a minimum because that is a good and generous size. If they are in the twos particularly in the low two, sort of 3m by 2.3m, that is starting to be really small. Remember, you are going to be spending a lot of time in there. Particularly if the tenant is sharing with someone else, they may want their own separate space. So you want those rooms to be quite big and in a perfect world, you would have the bedrooms separated by the bathroom in the middle, again to give you some more privacy. That doesn’t always happen to be the way, but the other thing to think about is the ratio between the living room to the bedrooms. There is no point having all this space in the bedroom and then your living room area is tiny. Tiny kitchen, tiny living area, tiny meals area and would you feel very cramped up. It kind of means that you have to go into your bedroom. So it’s about getting the floorplan proportion right where you’ve got a balcony, enough room to live in and also ideally, you’ve got separation between rooms and they are in pretty good sizes.

And the last thing for me to think about is noise. If you think about the bigger blocks where they do have a lift, you don’t want to be next door to the lift. You also don’t want to be next door to the motor that generates the air-conditioning because it’s just going to be this constant noise. But in a smaller block where you don’t have those things, you want to make sure you don’t have a noise of a busy road or you’re right at the back near the car park where everyone is coming in, moving all their stuff and make noises as they wander in. That’s a real consideration that you want to have because it’s a smaller space than a house or a townhouse. You are going to be in this confined space and you want to make sure that you don’t have many annoyances that come from being a spot that is in the direct way of all those noises.

So that’s a few things for you to consider. I am a strong advocate of apartments albeit only a small percentage of the apartment marketplace but I am an advocate of people buying apartment as an investment. For me, as I said, I like the 60s or the 70s and maybe the art deco that ultimately if you take into the account the privacy, the outdoor space, the natural light, the proportion of room and the noise, you got a better chance of getting an asset that would perform better for you in your portfolio.