What is Australian strata scheme and is there any profit in it?May 25, 2020
Relatively recently, Australians have introduced a new concept of property ownership that is called strata. A strata scheme is still pretty new in Australia, but it’s gaining popularity even though it may seem a bit confusing and foreign at first. In Sydney alone, the strata scheme brings in more than half of all residential sales due to its popularity with investors.
The rest of the world is not far behind in introducing this innovative property ownership either.
But what is really strata and how it works? Let’s try to find out, shall we?
What is a strata scheme?
Simply put, a strata scheme is a building or a complex of buildings that have been divided into “lots” – meaning individual houses, apartments or units. So, when you buy a lot, it’s these lots that you actually own and you share ownership of common property with other owners.
Let’s compare it with owning a house – when you buy a house, you own every brick of that house. However, when you own a strata unit you only own a lot, everything else – bricks, walls, gardens, roofs, and so on- is considered common property.
One of the benefits of this kind of property ownership is a friendly community-style environment. Similarly, it’s good to know that since you don’t actually own these common properties, you’re not responsible for maintenance and repair of them. It’s the owners corporation (all the lot owners) that should take care of them.
On the other hand, there are some downsides as well. Let’s say that you want to make some renovations or alterations on the building or a house, you won’t be able to make them because they are common property and they don’t belong to you directly. You as a lot owner will need to ask owners corporation for permission to do any changes on the common property.
You will also need a strata management company. Hire the best strata management in Sydney that offers some of the most experienced and successful strata managing services in the whole of Australia. Only the most experienced strata management company with legal knowledge can give you good information and advice when it comes to dealing with strata schemes.
Let’s take another look at all the things that you should know about the strata scheme and whether or not it’s profitable.
Strata rules and regulations
Let’s be honest about this, there are a lot of rules and regulations to be followed when you own a strata unit. There are also a lot of obligations as well. For example, you as a lot owner need to assist lot owners meetings where you’ll discuss all kinds of issues or disputes. If you are not able to assist these kinds of meetings for whatever reason, you can send someone in your stead.
A strata scheme operates freely thanks to government regulations and this is why the government has a lot of say in many things such as how lot owners are treated. As of recently, due to an increase in the popularity of the strata scheme, owners have become a lot more protected. This may be one of the reasons why the strata scheme is a profitable business right now.
We can’t move on without adding that every strata scheme has a committee that passes laws and rules. The committee consists of an elected group of owners, a company nominee, or a person nominated by the owner who is not an owner. The committee is responsible for the quicker day-to-day running of the strata scheme as well as the management of it amongst other things.
Strata managers and mediators
As already mentioned there are many rules and regulations to deal with, and sometimes you won’t be able to deal with all of them. That’s where the strata managers come in. A strata manager is a licensed professional who deals with things like general meetings, financial affairs, repairs with the common properties, collection of levies, and so on.
This means that every strata need good management. If your strata unit is in Sydney you’d be happy to know that some of the best strata managers can be found here.
We mentioned above that a manager collects levies, but what are levies, and why are they being collected? Strata levies are actually strata fees and they are regular financial contributions. These fees are paid by lot owners and are later used for maintenance of the strata property.
The amount of money you have to pay will depend on the size of the lot you own, the size and the age of the building and amenities. The fees will be increased if there are pools, gyms, elevators that need to be regularly maintained.
Currently, there are three main types of levies – administrative fund levies, sinking fund levies, and special levies. Administrative fund levies are directed towards maintenance of gardens, cleaning, utility bills, administrative costs, and other maintenance problems.
Sinking fund levies are used for bigger renovations and repairs such as plumbing, painting, and so on. And finally, special levies can be used for unexpected issues or when there are insufficient administrative or sinking funds. These levies are given as an addition to other contributions.
Is there any profit in the strata scheme? The answer is yes, the strata scheme is a profitable and affordable way to get into the property business. Currently, more than 317,000 strata schemes can be found all over Australia. In Sydney, a great number of commercial and retail properties are also a strata scheme.
One of the reasons why strata are affordable is because you’re not buying land. It could also be due to shared facilities and shared infrastructure services – meaning bills that are much lower once again due to shared facilities.
The strata scheme is new and still gaining popularity and that is exactly why right now may be the right time to get into it. There are many benefits of investing in this kind of property that may very well pay off in the future. Don’t be hesitant to invest in this great strata-titled property because now you know mostly everything there is to know about the strata scheme.