When it comes to property investing one of the common questions from our clients is whether they should be looking to buy a house or a unit.
Our answer – perhaps the more important questions should be, ‘what areas should I be looking to invest in at this time?’ and ‘what’s the appropriate level of cash-flow to suit my property plan and circumstances?’
Because, keep in mind that primarily as an investor, this business is about generating a positive return, managing your money and investments wisely, and in alignment with your particular goals and circumstances. It’s not altogether about what type of property you should purchase – though it is nonetheless an important consideration of course. So let’s look at some general information on each.
Houses come with more land – and land in prime areas appreciates – so capital growth over time may be better with houses. On the other hand, units make better use of the space, in terms of occupancy on a piece of land, and are generally more affordable with a lower price point.
With houses, you have complete control over your out-goings and maintenance. These expenses can end up being higher than a unit if anything serious is required, such as structural repairs or a new gas or electric system. But it isn’t that simple. With a unit, you will normally be involved in a strata scheme – meaning that you will share maintenance costs plus a sinking fund for future repairs – but, you will only have one vote on what happens – meaning if the majority want to make some improvement, such as a new balcony or garden upgrade, you will need to pay your share.
If there are lifts, pools or gardens, plus owners corporation fees, you can end up paying a lot more in the maintenance of a unit. If a house is in good condition it could be that it doesn’t need anything spent on it for years. So there is no hard or fixed rule, and you need to look carefully at the costs and get a proper inspection by a qualified inspector.
In terms of renovations, as a house owner, you don’t need permission for strata to make structural changes or renovations, but you may well still require council approval for anything substantial or an extension. With a unit, you would not be allowed any substantial renovation without strata permission.
The demographics of your tenant’s will often be somewhat different between a house and a unit. Houses are generally more desirable – with more space, yards, and fewer neighbours within immediate proximity. They are also generally more suitable for families. So on average you will find that tenants for houses will earn a little more, and you will be more likely to attract a family and more mature applicants compared with a unit.
You also need to consider what kinds of properties are in high and growing demand in any particular area. Is it for example, a family area, a student area, or a transient area? It’s important the type of property you choose will have demand both from buyers and people looking to rent in the area.
Ultimately, if you are wondering if to buy a house or a unit – really it’s more about location and the scarcity and demand for an area than just the type of property. As populations grow in many areas near to cities and employment, councils look to bring on higher density developments, as more people want to live closer to the action.
As land prices rise, small-block city fringe apartments near good transport can be a good entry point for investors. If well located they can achieve a similar or even higher capital growth than houses in the same area, as more people move into it. At the same time, it may well be easier to add value to a house, with an extension or renovation – which can be a boon for shrewd investors.
At the end of the day, you are looking to purchase for value growth, and to suit your circumstances and goals – not for the type of property. So we recommend getting good advice around what are currently the best opportunities for you. Get in touch for a chat.