You Will Learn:
- A little-known misconception about New Zealand apartments
- Hidden costs and problems you may face nowadays
- Essential steps to reduce complications
- And other practical tips you can implement today!
Today you will learn a little-known misconception about New Zealand apartments, hidden costs and problems, essential steps to reduce complications and other practical tips you can implement now.
1. Fire Safety
Your house is your castle. You want to be safe in a place where you sleep and live. New Zealand experiences over 300 apartment fire incidents per year. Here the fire trucks have a 7-metre high ladder that can reach only up to 5 storeys.
However, New Zealand is constructing taller and bigger buildings that will house a lot more people. More residents mean a higher chance of an incident due to a human error. Some of the apartment buildings are over 50 storeys.
If there is a fire and you live on the 45th floor, then you have a long walk down the stairs to reach your safety. If you invest in the long term, this will be a common issue soon because living in apartments will be more widespread in the future.
Therefore, if you buy for yourself or your family or you want to have good tenants, you have to think about it and consider safety features. I would be interested to know what do you reckon about it. Do you think about the safety features of an apartment when you buy it?
2. The Body Corp Rules That You May Not Be Aware Of
While you are the owner of the apartment, you have a lot of rules to follow and a little control. For example, if you like letting your real estate on Airbnb or similar websites, it will not happen as easy as it was last year.
An ever-growing number of body corps include it as a standard rule that you can not do any commercial accommodation operations.
Do you love pets and want some company in your apartment? Some body corps do not allow it. It can be due to the noise control or some other reasons.
Another common rule relates to your gas cookers. Some families prefer cooking with gas, but in many cases, it is prohibited too.
If you have done the renovation and your neighbour notices that you have got a gas bottle outside the apartment you may be required to reinstate the property to the original condition.
Gas bottles can also breach the contract with the insurance company, and if something happens to the building, you may be liable.
Do you want to add a heat pump to keep you warm during the winter or cool in the summer? It took me months to get approval from the majority of the property owners.
In their view, it can create additional noise or change the look of the property thus reducing the value of the real estate.
The next body corp rule also relates to renovation. For example, if you want to change windows or doors to improve insulation in your apartment, you have to get the approval as well. Thus, you have to get a majority to agree with what you are trying to do.
You buy something, but you have limited control over what you can do in your apartment. Have you ever come across any similar rules in a body corp? What is your least favourite requirement?
3. Off the Record Meetings
There were numerous articles on the Internet where people witnessed body corp meetings that decided not to write down some sensitive information that could potentially reduce the capital value of the real estate.
Meaning, if you choose to buy an apartment or unit title property like a townhouse, you will not know 100% truth.
If you ask all copies of the body corp minutes for the last three years to avoid this, you may want to ask the tenant directly if there was a builder on site, what they were trying to find in the property and where they were notified about any repairs.
If you plan to buy or invest any property with half a million dollars or more and rely only on your solicitor to check the paperwork that is not enough and you have to do some extra groundwork.
4. Offer a Good Return on Investment
Currently, people buy apartments because of the attractive higher yields. However, the Auckland council started to charge higher rates if people let their apartments on Airbnb or similar websites.
You will be slapped with extra fees after you clock up over 28 days on Airbnb. If you do it, the council will charge you with the back taxes. Also, do not forget about the insurance costs.
There is a lot cheaper rate for residential insurance if you do a regular long-term rental and agreement with your tenant.
However, if you do a short-term rental like on Airbnb, the insurance will consider it as a commercial activity and they will charge you 100% extra fees or 200% higher rate in some cases.
5. Body Corp Fees Are Highly Volatile
From my personal experience, your annual rates can double with little notice. For example, if the roof of the building has to be replaced even though you live on the ground floor, you still have to share the responsibility.
Or, if the lift has to be replaced, you are going to pay part of the costs too. It is another reminder to check the paperwork and make sure that the body corp fund has allowed for the long-term maintenance.
6. Off the Plan New Apartment Costs Can Get Out of Control
Recently buyers of the 500 unit Orakei Bay Village gave up after many delays and escalating construction costs pushed the prices up by 30%. In the meantime, you lose 1-2 years of waiting while the property prices are going up.
You miss the potential capital gain which can be NZD 50,000 – 100,000 you will not get. Time is money especially when you are dealing with the real estate.
Bonus Tip: Weathertightness and Earthquake Strengthening Standards
There will be another wave of poorly built apartments, townhouses and buildings because of the labour shortage. When you have pressure and tight deadlines, people cut corners in many cases and you as the owner deal with that later.
A new consideration has come to light about new earthquake standards. It has been reported that this includes not only commercial property but buildings as well that are two or three storeys high and consists of three or more household units.
These standards are for buildings that were built primarily before 1976. If you consider to buy or invest in an apartment of an old building you have to check with the body corp or your solicitor whether it is required any major repair to meet the requirements.
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