House vs Apartment
Do you know what the best investment portfolio looks like? Is it apartments, houses or a mix of both? It’s the battle of the ages: House vs Apartment.
The thing is the answer to this question can be different for everyone and the determining factor is often about location and budget.
I’ve invested in both houses and apartments. Some have tripled in value and some haven’t performed as well.
It all depends on your strategy.
Here is some information that can help you make your decision:
Apartment
Apartment in great locations can provide you with both capital growth and income. However, there are plenty of factors to consider when buying an apartment.
Benefits
Generally higher rental yield – good for cashflow
Easier to hold – a strata manager is responsible for the upkeep of the building
More affordable options available
Disadvantages
Lack of land value impedes capital growth
Strata fees
Limited renovation opportunities
Some markets are oversupplied
Banks can have stricter lending policies
House
While investing in houses offers great capital growth, units in good locations can provide the capital you’ll need to build up your investment property portfolio and build real wealth.
Benefits
Opportunity for higher capital growth – depending on market conditions
Strategic improvements e.g. renovations, subdivision, development
Depreciation of the structure of houses
Disadvantages
Generally lower rental yield
Higher maintenance costs
The first thing to work out is what you can afford. You can do this by speaking to a lender or mortgage broker. This will play a big part in what type of property you can buy.
If you can afford an apartment in a great location but not a house, it is worth considering purchasing the apartment. Properties closer to a city centre will generally cost more because proximity to high-income employment is a key factor that affects values.
You also need to think about location. This requires figuring out the market. Accessibility to transport, shopping hubs and lifestyle attractions, should all play a factor in your decision.
Then there’s the opportunity to improve the value of the property. Houses have greater potential for renovations, rebuilds and extensions.
In Between Options
The right property type for you depends upon a number of factors; your financial situation, how long you’ve been a property investor, the state of your current investment property portfolio, when you expect to retire, your capacity for risk and much, much more.
There are also other options available other than just house vs apartment. To balance affordability and size, consider a duplex, villa or townhouse.
In reality, both house, apartment or in between can work and there is no one size fits all solution.
The most important thing you do as an investor is to put in the work and research so that you are confident when you buy. By making informed investment decisions you will build your wealth and improve your life.
If you want to learn how to do this and start investing, come to one of our free Property Investor Webinars happening this week.
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