Should You Invest in One Bedroom Apartments?
Dilleen Property Group 2021
When choosing to buy an apartment, and in a particular a one bedroom apartment, there are many things to take into consideration. I personally own two one bedroom apartments in my property portfolio, and I believe they would make a great addition to any investors property portfolio. Below are three factors to always consider when purchasing a one bedroom apartment.
High Rise Buildings & Large Apartment Complexes
As an investor, personally I would avoid a one bedroom apartment in a high rise building with hundreds in the complex. You will pay higher strata and Body Corporate fees, as well as higher rates in general, particularly if elevators and pools are present within the complex.
Size of Apartment & Finance
Size is an important factor when purchasing an apartment to add to your property portfolio. In terms of finance, there are many different rules and policies surrounding one bedroom apartments. To access a range of lenders, many policies state the apartment must be 50sqm or more to be able to access finance. However, some other banks will say at least 40sqm.
You can purchase an apartment under 40sqm, however you will need a 20% deposit (minimum). This is because you will restrict your loan-to-value ratio. In my own property portfolio I have an apartment under 40sqm. I originally wanted to use a 10% deposit, however I was denied by the lender and had to pull more money to create a 20% deposit. This can essentially be a downside to one bedroom apartments.
One Bedroom Apartments Not Increasing In Value
This is a common misconception about one bedroom apartments. Through my own journey I have learnt that this is not the case. They certainly do increase in value. For example, one bedroom apartments in Parramatta, NSW, 10-20 years ago would have been secured for $100,000, but now are on the market for $400,000 +, depending on the quality. One of my one bedroom apartments is located in the Gold Coast and was purchased for $160,000 around 6 years ago, however it is now worth $220,000 +.
It’s definitely okay to buy a one bedroom apartment, provided the numbers work, and provided it’s aligned with your strategy. I’ve seen better growth in my apartments compared to some of the houses that are a part of my property portfolio. If you are looking to get your foot in the door, if you buy a one bedroom apartment in a high growth location it will certainly go up in value.
Disclaimer: This is not intended as legal, financial, or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature, you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.
