Strata titling of old units is a unique strategy used by some savvy developers to make great gains. And although the likelihood of finding these opportunities is becoming slimmer as the years go by, they are still available with some shrewd investigative work (and a bit of luck!)
Strata titling was first introduced in the 1960s. Before then, it was virtually impossible to own a portion of a property. Most blocks of units or flats were effectively owned in full by one entity, with the individual units leased out normally or with the tenants having shares in the property. Strata titling enables you to subdivide the units, meaning each can then be owned by individual persons or entities immediately adding value (and flexibility) to the property. Despite strata titling being introduced in the 1960s, it’s quite typical to find opportunities even in property built around the 1970s or thereabouts.
Of course, as with every development, there is an element of risk to this strategy. You need to be confident that you’ll be able to get the necessary approval from council to make it all worthwhile. The first obstacle is making sure the property was originally built as a block of flats, or converted with approval. This should give you peace of mind that the conversion should be a relatively simple process with the council. You’ll also need to check it’s not affected by a government housing scheme which could protect it from being developed. For example, some old blocks of flats house low-income tenants and if protected by a government policy, you may not be able to develop it as it would likely result in increasing the rent for these tenants.
Adhering to current building practices and codes is the other major and costly hurdle. You will need to comply with a range of council requirements which could include things like firewalls, visitor parking, private open space for residents, and meters for services like electricity and water housed in a common area with each property being on an individual meter. Even just getting the necessary access to address any of these potential requirements can be one of the biggest risks of all.
Finding one of these gems and successfully navigating the approvals process can potentially reap financial rewards. But finding these types of properties is certainly not easy. Often they are silent sales so it pays to get friendly with local agents in the area or a buyers agent with good connections and let them know what you’re looking for.