Strata levies, also called body corporate or owners corporation fees, are the regular payments every owner in a strata building makes to cover building insurance, common area maintenance, management and savings for future repairs. For unit investors they are often the biggest single running cost, and the main reason a unit’s strong gross yield shrinks on a net basis.
Key takeaways
- Levies can take 2 points or more off a unit’s gross yield.
- They cover building insurance, so unit landlord insurance is cheaper.
- A low levy is not always good. It can mean the building is not saving for repairs.
- Always read strata records before buying.
What levies pay for
- Administrative or general fund: day-to-day costs such as building insurance, cleaning, gardening, lifts, utilities for common areas and strata management.
- Capital works or sinking fund: savings for major repairs and replacements, such as roofs, lifts, painting and waterproofing.
- Special levies: one-off charges when the funds cannot cover a big repair.
How levies affect yield
In our rental yield examples, an inner-city unit at $520,000 renting for $550 a week has a gross yield of 5.50%. Its $4,500 a year in strata, together with its other costs, pulls net yield down to 3.34%. In our units vs houses comparison, a unit’s 1.33 point gross yield advantage over a house shrank to 0.48 points net, mostly because of levies.
Partly offsetting this, unit owners pay less for insurance (the building is in the strata policy), less maintenance, and usually less land tax.
Red flags in strata records
- Special levies raised recently or planned
- A capital works fund that is low for the building’s age and size
- Building defect claims or disputes, particularly in newer high-rise buildings
- Large levy increases year on year
- Unresolved water leaks, cladding or structural issues in the minutes
- By-laws restricting pets or short-term letting, if those matter to your plans
Order a strata report or read the minutes, financial statements and capital works plan before you buy.
Quick check: levies as a share of rent
Divide annual levies by annual rent. Under 10% is light, 10% to 20% is common, and above 20% deserves a close look at what the levies pay for. For the unit above, $4,500 / $28,600 is about 16%.
Test a unit with its real levies
Enter the strata levies with the price and rent to see the unit's net yield.
Frequently asked questions
Are strata fees tax deductible for investors?
Administrative fund levies are generally deductible. Capital works and special levies can be treated differently. Check with your accountant.
Why do units have higher gross yields but similar net yields to houses?
Strata levies take a large share of unit rent. Houses have no levies but higher insurance, maintenance and land tax.
Can strata fees go up?
Yes. Owners vote on budgets each year, and special levies can be raised for major works.
See what this property would yield
Enter the price, rent and costs to get gross yield, net yield and weekly cash flow.
General information only. This calculator and content do not consider your personal circumstances and are not financial, tax or legal advice. Speak to a licensed professional before making investment decisions.
