Like many investors in Australia, you have probably been considering getting involved in a serviced strata scheme and investing in a strata title unit, or units. If that is the case you are definitely going to want to gather as much data as you can on the property and the scheme involved.
The best way to enhance the disclosure documents that you will receive as part of your investment is to utilise the services of a professional inspection company and request a strata report. The cost is nominal compared to the money and headaches that it can save you. So let’s learn a little more about serviced strata schemes and why it is in your best interest to get a strata report.
What Are Service Strata Schemes?
Serviced strata schemes are a form of managed investment schemes that actually comprise two types of investments. The first involves acquiring interest in real property, a strata title unit, and the second involves the pooling of the property into a fund. For over twenty years now acquiring property units in serviced strata schemes has grown increasingly popular. It is a great way for investors to get into the real estate market. The types of properties that are classified as serviced strata schemes vary from apartment blocks to resorts and hotels located in popular vacation destinations. What makes it a strata unit is when the owner of the unit obtains a right to a financial return that depends, to some extent, on the performance of other owners’ strata units.
Who Regulates These?
There are two layers of regulation involved. The first is a function of the state or territory and relates to vendor disclosure relating to real property. The second is a function of the Commonwealth and relates to disclosure relating to a financial product.
Mandatory Disclosure
Thankfully the primary intent of the regulatory agencies is to ensure the adequate disclosure of information to prospective investors. Unfortunately there is a considerable lack of uniformity with the state and territorial laws that vary considerably from one to another. The areas of variance include the content and timing of disclosure as well as the type of investor protected by it. However the biggest challenge is that the disclosure documents provided are too complicated and too voluminous for the average investor to sift through and understand.
Cut to the Chase
Fortunately there is a quicker and easier way to get the information that you need to help you make a decision on what can be a rather complex investment opportunity. It’s called a Strata Title Report and it will tell you the following types of vital information:
- Whether or not the strata scheme is adequately insured?
- What regular or special levies you’ll have to contribute to?
- Whether or not there is any evidence of building or structural problems?
- Whether or not the strata scheme has an adequate reserve of funds?
- If there been a history of disharmony between owners?
- What the strata regulations are regarding items such as renovation, refurbishment or pet ownership?
Investing in a Strata Title Report from a reputable professional inspector becomes an easy decision when you consider what is on the line and what you have to lose if you make an uninformed decision. It’s even easier when you consider the nominal fee and the wealth of information that it provides.