House Vs Apartment – What to Invest In?
The property market is hotter than ever, with thousands of prospective investors weighing up their asset options. Houses and apartments are two of the most popular options chosen, but determining which option better suits your investment goal can be difficult. This article: House Vs Apartment – What to Invest In? has been put together to help property investors work out what works best for them.
House Investing
Pros
Flexibility
There are many pros to investing in housing over apartments. Primarily, investing in them allows for greater flexibility in terms of how the property is used. A house can be subdivided and used for more than one group of tenants. This allows landlords to earn more through dual-occupancy. This can significantly increase rental yields. A landlord may also opt to erect a granny flat, which can be a low-cost boost to rental incomes.
Landlords also have more flexibility with rental income and property value boosting renovations. They have the capacity to expand kitchens, add additional bedrooms, or do significant landscaping.
Landlords also aren’t subject to building co-op rules and regulations. This means that if they choose, tenants can have pets or use the property in more flexible fashions. These types of tenants tend to have a longer tenancy, meaning that there is less lost rental income between tenants.
Better Growth
Property and land ownership usually provides more consistent growth than an apartment, as it appreciates greater in value. This isn’t always the case however, with location and market conditions factoring into these returns.
Cons
Larger Start-Up Costs
Purchasing a house, on average, is more expensive than purchasing an apartment, usually by a significant amount. This is especially the case in high-demand areas like Sydney, Newcastle, and Brisbane. This can act as a financial barrier for those looking to invest. Alongside the larger deposit required, hidden costs like stamp duty, mortgage application fees, and building inspection fees can turn away those who aren’t financially prepared.
Larger Ongoing Costs
Maintaining a rental property can be an expensive affair, especially when you are looking to maintain significant rental yields. Tenant requests such as gardening or air-conditioning installation, and property management costs can rack up., reducing short-term yields.
Poor Developments
Certain area’s property values can be reduced through external factors. The construction of a bypass that increases traffic noise is an example of this. Building a large shopping complex that increases traffic in the area is another. These are out of control for the landlord and can reduce property values.
How do those pros and cons of house investing align with your investment goals? Find out the pros and cons of apartment investing below, in House Vs Apartment – What to Invest In?
Apartment Investing
Pros
Lower Financial Barriers to Entry In High-Value Markets
Apartments, in general, are cheaper than purchasing an outright property. This is due to it being a piece of a larger part of a property. In high-value areas, the small land size of an apartment allows them to be situated much closer to CBD’s and other high-traffic areas. This lower cost means less risk and more access to other investment opportunities.
Lower Ongoing Costs (Sometimes)
Being part of a building co-op means that each landlord on the title pays an annual body corporate fee that covers insurance, maintenance, and upkeep of common areas. Sharing these expenses in a body corporate can reduce the costs of these, compared to being paid for individually in a house ownership situation. Note: individual costs attributed to your apartment are not shared by body corporate.
Cons
Structural Integrity Issues Currently Affecting the Market
Recent issues regarding the structural integrity of apartment blocks in Sydney and Melbourne are impacting both the demand and supply side of the apartment block market. Tenants are going to be more hesitant in renting out an apartment if they are unsure of the stability of its construction, and will demand lower rent. Similarly, the growth of the value in the apartment may also be affected, with these structural issues affecting all apartments in the market.
Lack of Control
Being part of a body corporate puts restrictions on what a landlord can do with their property. They are unable to make major changes to the apartment without approval from the corporate, which can prove tricky when looking to grow their investment property potential.
Higher Ongoing Costs (Sometimes)
Certain apartment blocks can have higher ongoing costs, on average, than houses. Expensive maintenance costs can arise from items such as pools, gyms, and tennis courts. These are shared amongst the body corporate, but can still prove expensive for the sole landlord.
Level of Development
The capacity for many apartments to be built in the same area in a quick manner can cause oversupply. This reduces the value and rental yield for landlords.
No matter what your opinion is from the House Vs Apartment – What to Invest In? pros and cons list, we at Vision Property and Finance have helped hundreds of clients decide on what their best avenue is for their property investment. If you need award-winning advice from our team of experts, get in touch with us here.
