The trend for living smaller is only picking up speed, and that’s for good reason. Land is usually the most expensive part of a house purchase. The more you take up, the more you’ll pay - the property sitting on top of it is really just an added “improvement cost” to the land.
That’s why many people like the idea of a townhouse, terraced house, or apartment. Not to mention the lifestyle advantages; living more centrally, getting a commute where you walk to work, and no longer needing to mow the lawns every weekend.
But there’s some fine print that comes with buying smaller, and it’s important you read it. These smaller houses often mean you’re sharing the land with others, which means homework on what everyone else has been up to.
A terraced house means you’re at least sharing walls with your neighbours. An apartment usually means you’re all sharing the costs of maintaining the building. A townhouse could mean all sorts of different things, depending on what land title you’re on.
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On the latest Cooking the Books podcast we talked about what you need to know to make these property types work for you.
Many of these properties are run by a body corporate, so the first thing you want to do is request the AGM minutes, to see what the property owners have been talking about. Of course, if there’s something truly bad lurking in the property, other owners may want to hide it so it won’t put off future buyers. If they go “in committee” at any point to discuss troublesome issues, you won’t know about it.
How do you get around that? You request the body corporate’s bank account records, and check for payments to builders, consultants, surveyers.
Look up what those companies specialise in, or ask for an explanation of payments. You should get the truth soon enough.
If you’re worried about buying into a leaky building, well, fair enough.
Property investor David Whitburn says he does invest in apartments, but like every purchase, he does his homework first. As well as checking body corporate documents, he has his lawyer ask questions to the seller’s lawyer or real estate agent, about any remedial works issues.
But don’t let these things put you off a smaller house; you still need to do your homework when you buy a standard three bedroom standalone house.
Just ask someone who bought something without checking all of the alterations to the house had council consent.
A bit of homework can save you a lot of pain, with any property.
Listen to the podcast below
Listen to other episodes in the series:
Episode 1: Buy v rent
Episode 2: Saving for a deposit
Episode 3: Negotiating a mortgage
Episode 4: The power of location
Episode 5: Tricks for paying off the mortgage faster
Episode 6: How to crush the debt
- Frances Cook is the host of the personal finance podcast Cooking the Books. She is not a financial adviser, and all information is general in nature. For individual advice, see a financial adviser. Listen to her podcast on OneRoof.co.nz
