Investing in Apartments: Can it be a wise investment?

For many investors, houses are the target asset and apartments get an overlook. However, apartments can represent an attractive entry point into the property market for many buyers. Not only are they cheaper than houses, but they can also offer strong rental demand in urban areas and provide a reliable stream of long-term returns.

If an apartment seems an attractive investment for you, there are ways you can get the most out of your apartment if you understand both the opportunities and the limitations of owning an apartment—particularly when it comes to adding value through renovations, working with strata approvals, and timing your exit strategy.

Advantages of Investing in Apartments.

Apartments have several inherent advantages over freestanding houses for investors:

• Lower purchase price: Apartments generally cost less than comparable houses in the same area, making them accessible for first-time investors or those building a portfolio.
• Location benefits: Apartments are often situated in high-demand urban areas close to public transport, employment hubs, universities, and lifestyle amenities—key drivers of tenant demand.
• Lower maintenance: Shared facilities and common-area maintenance are handled by the body corporate (strata), reducing your direct responsibilities.
• Solid rental demand: young professionals, students, and downsizers frequently rent apartments, providing a steady tenant pool.
• Potential for strong capital growth: Well-located apartments can appreciate significantly over time, especially in tightly held inner-city areas with limited new supply.

In short, apartments can still be a good investment as they are able to offer a cost-effective, low-maintenance investment that delivers both rental yield and capital growth.

Adding Value to an Apartment to Create Equity

One of the best ways to accelerate your wealth building with an apartment is to add value through improvements. By increasing the property’s appeal and functionality, you can raise its market value (creating equity) and attract higher-paying tenants.

Common value-adding strategies include:

• Modernising kitchens and bathrooms: These two areas drive buyer and tenant impressions. Even small updates—new tapware, benchtops, or cabinet doors—can dramatically improve perceived value.
• Upgrading flooring and paint: Replacing worn carpets with timber-look flooring or giving walls a fresh neutral coat instantly lifts the space.
• Adding storage solutions: Built-in wardrobes or clever shelving can make an apartment feel larger and more practical.
• Improving lighting: Installing modern, energy-efficient lighting brightens interiors and lowers running costs for tenants.
• Enhancing outdoor spaces: If the apartment has a balcony or courtyard, updating tiles or adding privacy screening and greenery can create an attractive retreat.

But, Investors need to take note! Because apartments are part of a shared building, these changes often require different levels of approval before you begin.

Obstacles: Renovating an Apartment Requires Strata Approval

Unlike a freestanding home, your apartment sits within a larger building governed by a body corporate or owners’ corporation (commonly called “strata”). The strata manager is responsible for managing common property, set by-laws, and must approve certain works. This system protects the building’s integrity but can add complexity to the decision making for the individual owners of apartments when it comes to renovations and improvements.

The main obstacles investors face include:

• Approval timelines: Getting strata approval can take weeks or months, depending on meeting schedules, so any plans can take longer than wanted, resulting in lost rent and other additional costs.
• Restrictive by-laws: Some buildings prohibit major works during certain hours or limit what you can change.
• Noise and disruption concerns: Other residents may object to noisy works, which can lead to conditions being attached to your approval.
• Extra costs: Application fees, additional insurance, or bond payments to cover potential damage to common areas during renovations.

Understanding these requirements up front helps you plan your project and avoid fines or disputes.

What Typically Needs Strata Approval

While each building’s by-laws will differ, the following works almost always require formal approval because they affect common property or the building structure:

• Structural changes: Removing or altering load-bearing walls, concrete slabs, or structural columns.
• Plumbing and drainage changes: Moving pipes or installing new wet areas that connect to shared systems.
• Electrical upgrades affecting common wiring: High-capacity installations or rewiring through common walls.
• Changes to external appearance: Replacing windows, altering balcony balustrades, or installing external air-conditioning units.
• Flooring changes from soft to hard surfaces: Replacing carpet with tiles or timber usually requires acoustic assessments and approval to minimise noise transfer.
• Installation of heavy fixtures: Such as spa baths or large air-conditioning condensers that may impact structural load or services.

For these types of works, you’ll typically need to submit detailed plans, trades’ insurance certificates, and sometimes an engineer’s report to the strata committee.

What Typically Does Not Need Strata Approval

Minor, non-structural cosmetic changes within the confines of your lot usually do not need approval (but this needs to be checked on your buildings specific strata by-laws). These can include:

• Painting internal walls.
• Changing light fittings or power points (so long as you don’t touch common wiring).
• Replacing kitchen cupboard doors, benchtops, or internal doors.
• Updating appliances that connect to existing plumbing or power points.
• Installing window treatments such as blinds or curtains inside the apartment (some window dressings may require approval).

Always double-check your building’s specific by-laws, but in general, purely internal, and non-structural updates are considered the owner’s responsibility and can be done without a formal application.

Increasing the Rent of Your Investment Apartment

Once renovations are complete, you can leverage your improvements to command a higher rent. Tenants are willing to pay more for apartments that feel fresh, functional, and contemporary. Some proven ways to increase rent include:

• Adding in-unit laundry facilities: If the apartment previously relied on a shared laundry, installing a compact washer/dryer can significantly increase appeal.
• Upgrading appliances: Energy-efficient, stainless-steel appliances in the kitchen are attractive to tenants.
• Offering furnished options: In student or inner-city markets, a stylish furnished apartment can rent for a premium.
• Improving climate control: Installing reverse-cycle air-conditioning or ceiling fans enhances comfort and value.

Market the upgrades effectively in your listing photos and descriptions to ensure prospective tenants recognise the added value.

Timing Your Exit: When Is The Best Time To Sell Your Apartment?

Before entering an investment, it is always wise to understand when you will exit. This will help you to buy the right asset from the start because knowing when to sell can be just as important.
Ideally, you’ll plan your exit when both capital growth and rental performance have peaked, maximising your total return.

Some signs it might be time to exit include:

• Market peaks: If comparable apartments in your building or suburb are selling at record highs, you might capitalise on strong demand.
• Diminishing rental yield: If expenses are rising or rents are stagnating relative to your mortgage and holding costs, your return may be slipping.
• Shifts in local supply and demand: A flood of new apartment developments nearby can increase vacancy and dampen prices.
• Changes in your financial goals: You may want to free up equity for another opportunity or rebalance your portfolio.

To identify the right time to sell, monitor these indicators:

• Recent sales data in your building and surrounding area.
• Rental trends and vacancy rates.
• Upcoming infrastructure projects or zoning changes that could affect demand.
• Interest rate movements that influence buyer borrowing power.

Are Apartments A Good Choice?

Apartments can be an excellent investment vehicle, combining affordability, strong rental demand, and potential for capital growth. By understanding how to add value through smart renovations—and navigating the strata approval process—you can build equity faster and command higher rents. But- you need to have the right strategy to have an apartment in your investment strategy.

Equally important is knowing your responsibilities and limitations as an apartment owner. Some upgrades require strata approval; others don’t. Planning your works carefully and communicating with your body corporate reduces delays and conflict. Once improvements are in place, proactive marketing and strategic rent reviews can increase your income.

Your investment strategy should include an exit strategy. Keep an eye on market cycles to identify the best time to sell. By exiting at the right moment, you lock in your gains and position yourself for your next investment move.

With thorough research, careful planning, and a willingness to work within strata frameworks, apartment investing can be a powerful way to grow your wealth and build a resilient property portfolio.

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