Apartment or house: What’s the best investment?
There are a lot of conflicting messages for property investors when it comes to which type of dwelling will make the better investment: an apartment or a house.
While conventional wisdom states that houses have the advantage (the old adage land appreciates, buildings depreciate springs to mind) the changing landscape of Australia’s population and households speaks a different story.
With more and more people having smaller families and choosing to stay close to the CBD for work and lifestyle reasons, the demand for apartments in great locations is likely to stay high well into the future. That’s not to say that the humble house doesn’t have its benefits for property investors as well, with houses consistently delivering higher returns overall compared to apartments.
Despite this, whether a house or an apartment is a better choice for you will rely on several factors. RateCity.com.au has compared some factors that should be considered before choosing an investment property below.
While the ultimate decision on whether you prefer an apartment or house is up to a personal preference, these key factors can help you make the investment choice best suited to you, especially when going through a home loan process.
Generally, the lower price of apartments makes them a more suitable option for first time investors. When choosing an apartment as an investment property, keep in mind these features that are considered valuable by potential future buyers:
- Make sure it’s a decent size with multiple bedrooms that could potentially fit a small family or share household.
- A parking space is a highly desirable feature especially in areas that have limited street parking.
- Aim for an apartment that is easily accessible for families and the elderly to expand the amount of potential renters.
- The ideal apartment will face away from main roads and have natural lighting throughout the day.
- Beware of high strata fees as these will add up over the time you hold the investment property.
- Be careful not to buy in an area that is oversupplied with apartments. Instead, it may be wise to invest in a more established unit block a bit further from the city that will appeal to more renters.
While houses require a larger amount of cash up front, an investor who chooses a property in a popular location stands to make a good return. Consider these points when choosing if a house is the right investment for you:
- You will be responsible for ongoing maintenance and council fees which can be quite high and should be factored into the property cost.
- On the plus side, you will be able to make your own decisions regarding the maintenance and renovation of the house which can add long term value to the property.
- Remember that people increasingly want to live close to the city and are in smaller family groups so bigger is not always better when it comes to houses and location is important in securing renter demand.
Patricia Babalis is a personal finance writer for RateCity.com.au