Are studio apartments a good pick for first home buyers?

Are studio apartments a good pick for first home buyers?
Are studio apartments a good pick for first home buyers?

For first time buyers looking for inner city living, studio apartments can be a tempting choice.

With no walls between the "bedroom" and living areas, studio apartments can be a good deal smaller than one bedroom apartments - and therefore cheaper.

A search for studio apartments in capital cities will certainly throw up cheaper and more central opportunities than can be discovered with any other property type.

This studio apartment at 204/268 Flinders Street in Melbourne is on the market with a price guide of $158,000, through Spencer Nguyen and Robert Eggers of Dingle Partners. You would be hard pressed to find a non-studio apartment in such a central location.

A quick look at the apartment's floor plan reveals why it's so cheap: The bedroom doesn't share the space with the living room - there is no living room. There's hardly room for a bed, with a total area of around 18 square metres.

Are studio apartments a good pick for first home buyers?

While a studio of that size may seem unappealing to live in, they can offer attractive yields. According to the listing information, this studio is currently leased at $1,304 a month, representing a yield of 9.9%. So if you don't intend to live in a shoebox studio but instead want to rent it out, you could be receiving good value - if you feel comfortable renting it out to another person.

Such small studios in central locations are often popular with international students who need to be close to universities and haven't brought a lot of belongings. However, that can mean that the rental income is subject to seasonal variation.

This particular property was purchased for $173,000 in 2005, so the owners will have made a capital loss if it sells for its current asking price.

However, one studio apartment doesn't represent the entire market. There is plenty of variation out there in the studio market, from student shoeboxes to bright warehouse conversions. And of course, the more you pay, the better the apartment.

As with any other property, make sure you're not carried away by price. Consider the quality of the apartment you're hoping to purchase, the area and its attractiveness to future buyers and renters (remembering that both offer different gains for you).

If you're hoping to occupy the property, you should be open to compromise, but don't get carried away. Think about whether you would be happy living with a bed a metre away from your kitchen, or if it might be more prudent to save for a few more years before jumping into the market.

First Home Buyers

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