The PROPERTY DOCTORS, Sydney Australia Novak Properties
NOVAK PROPERTIES CREW and PROPERTY LEGENDS in the industry share their experiences and knowledge. Hacks and tips to make you a smarter property GURU :) Learn with exclusive content, advice, insider info and HOT real estate industry PRO SECRETS. For sale, for lease, residential, commercial, buying off the plan, finance, mortgages, interest rates, first home buyer, investments - all topics covered. The untold real estate info you've been waiting for.
The PROPERTY DOCTORS, Sydney Australia Novak Properties
NOVAK NEWS - PAYING STRATA FEES: THE GOOD, THE BAD, THE UGLY OF SHARED LIVING!
Unlock the secrets of effective property management with our latest episode, where we promise you'll learn how strata levies might just be the hidden asset in your real estate portfolio. Ever considered that higher levies could indicate a proactive and well-managed property? We explore this intriguing perspective, breaking down the administration fund for day-to-day operations and the capital works fund for future improvements. Discover how understanding these financial nuances can empower you as a buyer, offering a glimpse into the long-term stability and planning of a potential investment.
Our conversation also features expert insights from the seasoned team at Novak, guiding you through the complexities of strata reports. With a wealth of experience in strata-titled properties, they offer essential tips for navigating property purchases, emphasizing the importance of starting with a comprehensive strata report. Whether you need advice on leasing options or unpacking the details of a strata committee's actions, our episode equips you with the knowledge to make informed decisions in the world of real estate. Tune in for a masterclass in strata management and elevate your property investment strategy today.
Ladies and gentlemen, we're running a little behind schedule. We're building up the anticipation. Stevan, of course, here with Billy. Ladies and gentlemen, novak News it is 8.07 pm. Stay tuned. A lot to talk about Guys. Here we are. We're live in the studio. Good evening. Topic of discussion tonight Billy strata Strata fees.
Speaker 2:It's everyone's worst nightmare moving into an apartment, paying a mortgage and then getting hit with four big bills a year. Yeah, Strata, which I guess for a homeowner is something you're factoring in, just running expenses year on year. But apartment owners and strata title, everyone's chipping in. Yeah, absolutely.
Speaker 1:So what is a strata? Yeah, absolutely so. What is a strata? I mean, the strata title is a form of ownership and it's common with apartments, townhouses, where essentially you shared facilities which generally lead into what is your strata levy. So tonight we're talking about strata levies. Billy, a lot going on around DY Bart, like when you drive up and down the streets. Yeah.
Speaker 2:These ones in particular, running from sort of top to bottom with the beach, a lot of these ones where our fingers sort of running there and here and here. These were all built in the 60s, 70s, 80s. You know, within a 20-year window you would have seen a huge um influx of new stock to dy. A lot of it, when you drive down the road, looks like a blonde brick or a red brick and I guess they, when you, when you think about it, they're getting on. They are their own properties no-transcript.
Speaker 1:So if you apply that to today you're looking at, you know, 60, 50, 60, 70 years of age, a lot of these buildings and this generation of buildings exceptionally common, not only across the northern beaches but across most of Sydney.
Speaker 1:So it is coming to a point. Now that you drive up and down these roads behind us, down to the beach, you do see scaffolding up around. There's obviously people worried. What's going on? Is it good, is it bad? And then, if you're a buyer, you're going in and viewing these properties or even an owner, I should say and you're seeing these levies moving upwards, and is that a good thing or is that a bad thing? And that's what we're here to talk about.
Speaker 2:Yeah, okay. Well, let's talk about, first of all, what actually is included in your strata rates, Because I think buyers miss things included. They see the overall number and go that's a lot of money. But, as an example, there's things like building insurance, which you would pay for on your own if it was not a strata title, whereas in this case the building insurance is included.
Speaker 1:Yeah, yeah, your stratas typically your quarterly stratas split into two main categories an administration fund or an admin fund. And the other one used to be called a sinking fund, it's now called a capital works fund and ideally they're two different things. The administration fund is more so aligned with the day-to-day running, the day-to-day kind of budgeting um of the property and the maintenance of the property. The capital works fund is more like a I like to say to people a compulsory savings account. Yeah, it could be cash or it could be held in assets, but it's more of a savings strategy for the building?
Speaker 1:um, and another thing I say, before we jump into it is is that a strata? In my opinion, is is a really good thing if it's run correctly and it's proactive and you've got owners that care about it. It's a compulsory savings account for your apartment, for your building, whereas if you own a home, you know something goes wrong. You've got to dip into your pocket unless you're budgeting for certain items. You know there's always maintenance to be done with the house.
Speaker 2:Um, with a strip, with an apartment or a townhome, your strata is that compulsory saving, so it's not so much a shock yeah, that's what we need it and I guess you've got two different sort of approaches a proactive type, which is sometimes, you know, going above and beyond what's required as a part of a 10-year plan, which is often the minimum everyone, by legislation must have a 10-year plan for the building. There's people that sort of go above and beyond that and, you know, like to keep things reasonably tidy. That sometimes as well in the newer buildings they they run like clockwork and they've got professional management rather than just relying on the owner's corporation. And then you've got a reactive strata committee and I guess that's someone that's generally reactive to work that needs fixing. Yes, they make the savings, but it tends to be a little bit more on a case-by-case basis when things pop up.
Speaker 1:Yeah, both have merits absolutely, and as a buyer it's hard to differentiate these in the marketplace.
Speaker 1:So a lot of times you might see two properties that are absolutely identical.
Speaker 1:Let's just say there are two identical properties and there's a significant difference in the strata levies.
Speaker 1:Now the properties could be in exactly the same condition with the exact same amount of things coming up in the building work required to the building.
Speaker 1:But if you've got a proactive owners corporation, odds are the levies that you're looking at when you're going to buy that property are higher because they're putting money aside, they're already tackling tasks and as a buyer you might actually be turned off and say, hey look, why would I buy apartment A that has a strata levy of $1,100, where I can buy apartment B, which is exactly the same but has a levy of $750 per quarter. So it's not always accurate to say that a higher levy means a worse property, because in five or six years, once things come into play, it could very well be that the one that was left behind not left behind but was more of a reactive approach could see that if something wasn't addressed sooner, it's grown into a larger issue. So you've got to be smart at what you're looking at out there and proactive doesn't you know or reactive a lower rate, sorry does not always equate to a better property.
Speaker 2:And with any building, the way they budget the financials. Money can be raised in two different forms, one being a high quarterly levy where they build savings. Again, that has its pros and cons. The other is raising money in a one-off occasion, like a special levy. I know that word rings red flags and alarm bells for a lot of people, but that's a one-off occasion where they raise those funds to meet the um, the work needed. Yeah, yeah, across the beaches we see, you know, for most of the buildings, the two big ticket items being probably balconies, yes, and fire upgrades yeah right now.
Speaker 1:so the two common things like billy just mentioned for those 60s 70s builds are fire upgrades, so new changes to fire restriction, which means you've got to have smoke alarms in common properties, fire extinguishers, depending on how long the block is or the driveways are. Some need to have a hydrant put out the front. Yeah, so it's good to know that's being done in a property you're buying. That's definitely something we're still seeing a lot of. It doesn't seem to be any kind of rhythm to how how council's addressing that it's just when they pull your number, I guess you're up.
Speaker 2:You're up and I guess these are the things you can look for in your like open home inspections. This is a. This is a bit of a a serious one, but this is a fire panel. They don't often look like this big. Normally it's about half as big. You sometimes see these on the walls at the front of the entry. Once you're on the inside, these are like your HQ for your fire system. So if you can see fire exit signs and you can see smoke alarms and you can see this, that's typically what a fire upgrade looks like for a building. They're really expensive.
Speaker 1:A little giveaway to me as well is when I'm in the properties. If you have a look at the smoke alarm, uh, that's either in the common property, so that's in hallways, or within the actual apartments themselves. They're no longer allowed to just be a battery operated unit. It needs to have a power supply behind it as well.
Speaker 2:Yeah, so, um, if it's got a power supply behind it it's been updated and it probably reflects, you know, uh, an updated fire fire standards in the property and I guess, like your common areas as well, a proactive strata of generally updated there what's required. As an example, balustrades is a really good example of that. Sometimes, with the fire upgrades, they're actually required to have a hand railing at a certain height, have the signage and then also have sometimes stair caps as well, so it's not sort of slippery.
Speaker 1:So these are some things that you can look for, yeah definitely, and the balcony works typically comes back to the big bad word of concrete cancer or spalling. Concrete spalling what that is? Everyone's probably heard of it. Most people think they know what it is, but essentially it's the reinforcement within the concrete. When the building's built, it actually starts rusting and it expands and it cracks your concrete.
Speaker 1:Now we live in, obviously, a coastal part of the beach, as we're right on the beach here. So again, an active owner's corporation, when you're close to salt air, is vital as well, just in the maintenance of your property and the longevity of your property, which, not even in the long haul but just in the medium, even the short term, improves the value of your property.
Speaker 2:Yeah, and aesthetically looks so much better Like, as an example, same building, different balcony, you know balustrading and it looks like they've updated it a little bit. There's huge value out here. Yes, it costs, but you do see a return on investment. Um, you know owner court owners, corporations take out loans to. You know service this cost sometimes, or, um, or accumulate the savings as a, as a project, and save. But you can. You can see um it does. It does look good and yeah, I guess for a lot of these buildings it's not so much if it's more when. Yeah, absolutely.
Speaker 1:And look, it's like a car, it's like anything. Everything involves maintenance. I say this to people, car people. I say to them look, it's like buying. Imagine you went out to buy a 60-year-old car and it's got a reconditioned motor. A reconditioned motor, a reconditioned gearbox um, you know, new brakes. You'd be like, wow, that's, that's pretty amazing. But guess what? The car costs an extra ten thousand dollars over the identical car. But the other car, the gearbox, doesn't work. You know the motor has has never had any major work to it. It's something's gonna happen. Yeah, so I don't know, it's still an analogy, but um, no, but it's true.
Speaker 2:It's just running costs, running costs, everything's got running costs. Everything's budgeted in at the end of the day.
Speaker 2:Yeah, I had a good bit of advice from the boss the other day how to work out what sort of semi-normal strata rates look like these days. Yeah, because you know you walk through a three bedroom and they're the same cost. If you try and sort of just look at the value of the property, say it's a million dollars, if you subtract a couple of the zeros, you start around that sort of thousand a quarter, two million dollars, two thousand a quarter, three million dollars, three thousand, just as a really generic. If you're going to butcher the numbers and just chop it up, that's not maybe a bad way to do it, but it does fluctuate. There is ups and downs.
Speaker 1:There's often calls as well for a lot of the stuff Absolutely, and you're starting to feel like fees include a lot of things, like I've got a short list here but cleaning gardening. So if you've got a complex that has a lot of gardens or a lot of common areas, obviously the cleaning costs will be there Repairs and maintenance, the ongoing and again the day-to-day kind of things behind it, insurances, like Billy touched on earlier.
Speaker 2:Yeah.
Speaker 1:Building insurance and other insurances around that Public liability, public liability.
Speaker 1:Yeah, yeah, You've got utilities, so there'll be common electricity services, the hallways, the driveways. You've got water, Items of that and also the management fees of the strata company that you've got managing it. So all of those things fall into your strata levies as well and they're all determined by the owner's corporation. Typically you'll set that at an annual budget, generally at the AGM. Every 12 months You'll have an annual general meeting. Go through that, set a budget and address things that you want to look at um with it.
Speaker 2:Yeah yeah, at the end of the day, um, that you can't avoid paying strata, that there is no um, there's no shared living where you don't pay anything. It's the same with a house there's always going to be running costs. You know, sure, some are good, some are bad, a bit prickly, um, but it's then budgeted into price. So, as a buyer, you know, sure, some are good, some are bad, a bit prickly, but it's then budgeted into price. So, as a buyer, you know, when there's obvious work, it's just budgeted into this and see a buying price as well yeah yeah, yeah, and for investors, tax deductible, is it?
Speaker 1:well, that's an expense, that's something I was just going to quickly bring up is that you might be looking at buying a property which could have a special levy coming up to it, and typically there's two ways that that's addressed during the buying or the selling process. Sometimes an owner will pay that levy so that it's not passed on to the purchaser. So, come settlement, any outstanding levies are paid for by the vendor, that's, the home seller. The other option can be that, as a buyer, you can renegotiate the price, bring it down a little bit. Option can be that, as a buyer, you can renegotiate the price, bring it down a little bit. It means that your stamp duty will come down a tiny bit, tiny bit, but also that those levies that you then contribute as as the property owner if it's an investment property tax deductible. Yeah. So there's other ways of tackling it. If there's work coming up as a buyer, have the seller pay for it, or two, you can pay for it and take advantage of some tax deductions as well cover the topic tonight.
Speaker 2:That's rapid, anything else no, mate I think that's about it for tonight.
Speaker 1:It's only very quick, but, guys, if you need more, we're all available, always available. Billy um myself, stevan team at novak um any property needs strata. Questions um, even when it comes to leasing, what we can do yeah have it answer any for you and we're fortunate to represent so many properties that are strides strata title.
Speaker 2:There's not much. We haven't seen. So even if you're buying something and the best place to start is downloading a strata report. Generally speaking, agents you know and the owners organized, organize those through a third party and then get them supplied for the buyer. But but Strata reports like your best point of contact to go through all the information for the building and if you've got questions just send us a message. Love to help. There you go, have a good evening, thanks.