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

Why should you invest in a townhouse?

Who do townhouses appeal to?

In recent years, townhouses have soared in popularity, attracting a wide range of buyers and tenants. Young families, professional couples and downsizers all seek out the easy-care living that townhouses can offer.

According to the ABS, the proportion of family households has been declining. In the mid-80s, families made up 77% of Australia’s households. In 2016, this figure dropped to roughly 70%. Over the same period, the number of single-person households increased from 19% to 24%.

With smaller family structures, there’s less need for a big backyard, and greater demand for affordable, low-maintenance homes.

What makes an investment-grade townhouse?

First and foremost, the location is key. Your investment-grade townhouse will be most appealing to potential tenants if it’s close to everyday conveniences such as retail stores, public transportation options, and local parks.

Secondly, the design should make the most of natural light to avoid the dark, cramped feel that can sometimes be the case with townhouses. A well-designed townhouse should have floor-to-ceiling sliding doors or skylights to capture natural light from different angles.

Quality fixtures and finishes will also attract higher-paying tenants, as well as increase the value of your property over time. Finally, consider the size of the townhouse as well as how much storage it offers. Opt for properties with built-in closets, pantries, and storage space suitable for bikes or sports equipment.

What you need to consider before investing in a townhouse

• Different types of contracts: While single-part contracts may be the most familiar option, many developers are offering split contracts as an alternative. With a split contract, the purchase of the land is on one contract, and the construction of the property on another. The benefits of such an arrangement are clear – you only have to pay stamp duty on the land. However, hold costs during the build period also 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.
• Community facilities and fees: When looking for a new townhouse, be sure to take note of the community facilities on offer. Many developments offer great amenities such as parks, playgrounds, BBQs, firepits, and pools, which can help to create a sense of community among residents. Although these features may add to strata fees within a development, careful management of these costs can result in very reasonable fees overall. Additionally, these facilities can greatly increase the appeal of a development, resulting in stronger rental rates and resale values down the line.
• Strata vs freehold title: Another factor to consider when investing in a townhouse is the title of the property. Many developments feature strata-titled properties, which are managed by a strata company. This setup can offer owners additional peace of mind, as the strata company is responsible for the maintenance and repairs of common areas and certain shared infrastructure. However, freehold titles are also available in some developments. With a freehold title, the owner has complete control over the property and does not have to pay strata fees.

Confused? Don’t be afraid to ask your solicitor or real estate agent for guidance and further explanation – they’ll be more than happy to help you navigate the different implications of each type of title.

A checklist for choosing the best townhouse investment

Are you considering purchasing an investment townhouse property but are unsure of where to start? Look no further than Ironfish, where our portfolio approach to investing can help you achieve your financial goals with confidence.

Our in-house property selection team is dedicated to sourcing recommended properties for our investors across Australia’s capital city markets, including apartments, detached houses, and of course, townhouses.

We understand that each property type has its own unique advantages, and we leverage those advantages to create a diversified portfolio tailored to your needs. With Ironfish, you can rest assured that your investment will be in good hands.