What to look for when buying a townhouse: tips for investors

Townhouses have the most appeal when they are bright, spacious and modern. Location is crucial –everyday conveniences should be in close proximity. If you are looking for strong capital growth and tenant appeal, look for a townhouse that is only a short walk from everything a potential tenant would need – good local retail, public transport options and local parks.

When it comes to design, a well-built townhouse makes the most of natural light. They may have neighbours on two sides with windows only at the front and rear – but this doesn’t mean they have to be dark and gloomy. A well-designed townhouse is sensitive to its aspect and neighbours, capturing natural light from different angles through floor-to-ceiling sliding doors or skylights.

Though they’re smaller than houses, townhomes should never feel cramped, or be lacking in storage. There should be space to freely move between living and dining areas, and ample storage. When buying a townhouse, check the floorplan for built in robes, sizeable pantries, and plenty of storage space suitable for bikes or sports equipment.

Whilst a standard, single-part contract is still the most common type for a new townhouse property, split contracts are becoming more popular with developers. This is where the purchase of the land is on one contract, and the construction of the property on another. The pros for the purchaser are that you need only pay stamp duty on the land. However, hold costs during the build period need to be considered. The finance process of split contracts can be tricky, so it is important to ensure you’ve got a good mortgage broker who is familiar with these types of contracts before proceeding.

One of the perks of some new townhouses are the great community facilities on offer like parks, playgrounds, BBQs, firepits or pools. These add appeal to townhouse developments and help to create a sense of community, with residents interacting in these common spaces. These features may have an impact on strata fees within a development, however carefully managed strata-costs can result in very reasonable strata fees – and these features can add significant appeal resulting in stronger rents, and stronger resale values too. Check what’s included with your townhouse, and the associated strata or maintenance fees to look after it – these costs should be factored into your purchase decision.

Depending on the development, the townhouse could be under a strata, community or freehold title. Strata title is just as you would find with apartments, where strata fees are contributed to maintain the buildings and townhouse estate. Under community title each owner has full ownership of their lot, but pay to maintain communal facilities like pools, outdoor entertaining areas, BBQ areas, and playgrounds. Under a freehold title (also known as torrens title), everyone owns their lot completely, and there are no shared amenities. Before buying a townhouse, your solicitor will be able to explain which title your potential purchase falls under, and the implications of each.

• Local retail, parks, schooling and public transport links in close proximity
• The floorplan suits a range of household compositions like downsizers, families or young professionals
• The design lets in a lot of natural light to living spaces as well as bedrooms
• There’s plenty of storage space throughout – think built-in-robes, linen closets, and storage space within the garage
• What common facilities are within the development, and will this add value and appeal to tenants or owner-occupiers?
• The type of title (strata, community or freehold) suits your property investment needs

At Ironfish, we take the ‘portfolio approach’ to investing which is designed to leverage the unique advantages of each residential property type: apartments, townhouses and detached houses across Australia’s capital city markets. We have an in-house property selection team which helps source recommended properties for our investors.

To find out more about how our Portfolio Approach can help you achieve your financial goals, book an appointment with our experts.