Falling in love fast can see us overlook all the little things that perhaps we should have paid greater attention to before we fell hook line and sinker. And it’s no different when it comes to buying a property.
Getting the balance right between using you heart and head when looking for a property is important. After all, perhaps there’s a very good reason we shouldn’t get involved with certain property types.
Maybe some properties are just bad news or simply hard work. Whatever the case might be, chances are your lender has been involved with one of them before and knows exactly why you should be exercising caution.
If you’re buying a property and will be relying on finance to complete your purchase, it is a wise move to find out sooner rather than later if your lender has any particular requirements around the type of property you are thinking about purchasing.
They might not tell you outright to stay clear, it might simply be a case of proceed with caution. But if you don’t ask you won’t know and the alternative ‘If only I had of known’ can sometimes come too little too late.
Here are a few of the more common property types that lenders generally don’t like because they tend to hurt property buyers.
Studio Apartments
Studio apartments (or flats) or bedsits as they are also sometimes called, provide compact almost hotel room style living. They’re not for everyone and that’s the point.
Often, they are not more than 40 square metres in size, inclusive of kitchen, living and sleeping area in the one single room. They are often found in what today are considered to be popular urban CBD fringe suburbs. Think Potts Point or Elizabeth Bay in Sydney.
They are more conducive to short term accommodation rather than long term residency which means they appeal to a limited market only, and this is the precise reason that lenders don’t like them so much.
Company Title
This is a form of property ownership like strata title but less common. With company title an owner buys a share in the company that owns the title, rather than the title itself.
It’s safe to say company title properties are tricky to deal with and poorly understood. As a result, they tend to be less marketable and attract a lower sale price when lined up against their more attractive strata tiled peers.
Company title properties are more commonly found in pockets of the Eastern Suburbs of Sydney in and around Bondi, but outside of here they are less known. It makes sense then that lenders don’t get involved at all, or if they do, only after strict ground rules have been laid out from the get go.
High Density Apartments
With population growth expanding the way we live in Australia is changing. Apartment living is on the rise, especially in the capital cities of Sydney and Melbourne. But sometimes developers build it before ‘they’ come, they being buyers.
To save costs when building high rise apartments, developers also tend to adopt a cookie cutter approach with the design. It’s a case of same same but no different. While this might not bother a tenant so much, it will likely deter owner occupiers who want a unique and appealing home to live in for the long haul.
Either way, you can’t sell a product if there are no buyers for it. And to create demand when it doesn’t exist often sellers are required to heavily discount on price. This is another obvious reason why lenders treat mass produced high density apartments differently or give them a wide berth all together.
What You Should Do
My advice if you’re getting ready to buy a property, is to take some time and make further enquiries of your lender before you even start your search. Find out if there are any properties that you should steer clear of.
When you think about it there probably is a very good reason lenders treat certain properties differently. Perhaps they’ve been hurt, I mean burnt before. It might be a case of once bitten twice shy.
More often than not lenders tend to get a bad rap, but maybe when it comes to buying the right property they do have your best interests at heart.
If you find yourself struggling with the difference between a strata or company titled property, it’s safe to say you might need a little help in this area. I love talking property so if you have any questions why not drop me a line here.
If you found this article helpful perhaps you might also like Expert Advice For Bidding at Auction.
Shelley Horton is the founder of Sydney based exclusive buyers agency Albion Avenue. With a 20 year career honing her skills in every aspect of the property industry Shelley knows what makes a property worth buying and how to get the best deal.
