Its an age old question, which should I buy a unit/apartment or house and as if often the case in real estate, there is no obvious, clear-cut answer. The reason for this is that there are many factors that we look at for your consideration.
Argument For House & Land Investments.
Personally, when purchasing a property, I tend to go for a house mainly because of the potential for development. If I can get a decent block in a growth area, there is the potential for developing and increasing yield, even if the development is only to the point of dual occupancy.
This isn’t a go to for all investors, however. There is a long-held argument that the value is in the land, as land will appreciate, and the buildings on it will depreciate, therefore, a house on a block of land is more advantageous than an apartment in the city. I need to tell you that in this argument, there are many factors to weigh up!
A house on a block of land is restricted in its potential to location, potential growth in the area, and council regulations for development. You also need to be able to constantly rent the property, and maintain it. What is the point of having a house with land if it is difficult to rent and leads to you not being to hold onto it?
Argument For Unit’s or Appartments.
With regards to units, you can get maximized rental return and minimal vacancies by picking a quality development in a quality area.
Buying property around infrastructure like trains / trams, major highways, large shopping centers and most importantly close proximity to the city will make the property more desirable to tenants. This benefits the landlords tangibly by attracting a higher rental yield and lowering vacancy rates.
Units or appartments provide a entry level into a high priced area. Consider Brighton Victoria, the median house price is approximately $2.55M (2018) where as the median unit price is $985K.
At Wise Real Estate Advice, our three top tips for ensuring a profitable investment are:
- Get a good buyers agent.
A good buyers advocate is worth his/her weight in gold. Consider that your hiring expert investors that were professional real estate agents, this will decrease the risk of purchasing a property and give you confidence when buying.
They will make sure you purchase a great property that attracts good tenants, which will decrease your vacancy rates which impacts your pocket. They will also ensure you don’t over pay for property.
- Review the rental market around the potential property.
A good agent will be honest with you about what your rental capacity is for this property in the current market. Check the areas vacancy rates and how much competing stock is on the market. Stay away from irregular properties for the area, eg: don’t purchase a two bed room apartment in the suburbs were the rental market is used to four bedroom houses on large land allotment.
- Once purchase, routinely maintain your property
Keeping your property in good condition will increase its overall profitability whether you are leasing it, or selling it. No one likes paying maintenance bills but having a investment property that’s kept in good order will decrease vacancy rates, increase rental yield, increase your capital growth and decrease your time on market when selling. For more information on this topic read ‘cut cost and increase your rental income.’
4. Do you have a plan for moving into the property one day?
Many buyers have a back up plan of one day moving into the property if life changes. Larger properties can provide options for families like schools, parks, shopping centre and child care options. A unit could provide better access to work and lower living costs for instance not needing to own a car, not maintaining a garden etc.
The quality will be the best determinant in the decision of whether a house or apartment is best for you. Invest in the best quality property your budget allows irrespective of if it is stand alone, or strata-titled.