HOW TO FIND UNITS WITH CHEAP BODY CORPORATE LEVIES

HOW TO FIND UNITS WITH CHEAP BODY CORPORATE LEVIES

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Average levies in the buildings that I search in South East Queensland are between $5,000 – $6,000 per annum for both admin and sinking funds combined. That’s average on base levies only. That said, the cheapest levy I’ve ever seen was $150 per annum. The highest was more than $25,000. For one year.

So what makes our levies so pricey and so variable?

YOU GET WHAT YOU PAY FOR

Other than size, which actually has less impact than you might think, the key drivers of levy expense are facilities.

If a building has a pool or a gym or a security guard then those facilities need to be paid for. And that cost comes directly from levies. Ergo, the more facilities you have, the higher the costs to run the body corporate and the higher the levies.

The most expensive “facility” is a Resident Unit Manager (RUM). A good RUM’s is an great asset to a building, however, just like everything else, it’s an asset that needs to be paid for.

WHERE DO LEVIES GO

Stewart Silver King & Burns (SSKB) a presentation in August 2013 at their Gold Coast trade show where they answered the question “where do levies go?”

The most expensive items, as an average, expressed as a proportion of administrative fund levies are:

  • Resident Manager 30%
  • Repairs and Maintenance 23% (plant and equipment 4%, pool 3%, grounds 4%, building 6% and lifts 6%)
  • Insurance 10%
  • Electricity 10%
  • Cleaning 9%
  • Security 7%
  • Others 7% (the main cost here is body corporate management fees)

Those figures are averaged over all buildings SSKB managed at time of printing. The breakdown differs considerably based on how many lots the costs can be offset against.

For instance, in a building with less the 50 lots 46% of the admin fund levy is paid out to a resident manager and 11% to others. That’s a whopping 57% just to have the building managed, prior to anything else.

Contrast that with a larger body corporate of 200 plus lots. The RUM is now 21% and the body corporate manager 7% making management 28% of total admin costs.

The more lots in a body corporate the more economies of scale kick in because there are more lot owners to share the cost, making facilities far more affordable for everyone. That said, it’s also true that the larger the building the more complex it is and the more it costs to run.

FINDING BODY CORPORATE’S WITH LOW LEVIES

Finding body corporates with low levies is a question of analysis of the facilities offered. The body corporate with the lowest levies will have:

  • NO RESIDENT UNIT MANAGER: Any time there’s a RUM the levies will be higher. Generally speaking the more lots in the body corporate the more the cost is offset and the benefit maximised.
  • NO LIFT: A lift doesn’t cost that much in terms of administrative levies but it will add significantly to the sinking levy because lifts ultimately do need to be replaced. Again, the more lots, the more the cost is offset.
  • NO GYM: A gym will incur extra cleaning costs and extra plant and equipment cost, both capital and maintenance. If you can save money on a gym membership this could be a bonus, otherwise it’s just another cost.
  • NO SAUNAS, THEATRES, LIBRARIES OR CONFERENCE ROOMS: These are lovely facilities in a holiday resort but simply add to the bottom line with levies. Unless you’re prepared to pay the price give them a miss.
  • NO POOL: A pool is a lovely feature; it enhances the grounds and offers a meeting place whilst actually being quite useful. And shared pool is very cost effective. Still, at the end of the day it is a cost that adds to the bottom line.

The lowest levies with be found in modest three story walkups. The building will be built from block and require minimal external care. The grounds will be small but well planted and easily maintained. There will be between 10 and 20 units to better offset costs amongst owners and lot owners will either self-manage or utilise an inexpensive body corporate management firm.

Whether you want to live or invest in that sort of building is another story altogether. Maybe it’s worth carrying your groceries to the top floor if the levies are going to be significantly lower. Maybe it’s not. At the end of the day it’s up to each investor to balance their wants and what they’re prepared to pay for their wants for themselves.

Personally, I really couldn’t cope without a pool.

 

Lisa Rutland is a search agent and director of MyBodyCorpReport.com.au a south east Queensland based body corporate record searching business. Over the last eight years she’s learnt a huge amount about body corporates which she likes to share with whomever she can get to listen. Her website is here. Check it out.