Apartment or a House as Your First Investment Property?

Sep 26, 2018 | Purchasing Property

So, you’ve decided to enter the property investment market. The good news is, when done right, property investment can be a great way to secure your financial future. Now you ask yourself, “Which should I go for, an apartment or a house?” Knowing which one you should choose is an important step in planning your investment strategy and has a big effect on how successful you’ll be.

We’ve come up with a few key insights to help you arrive at the right decision.

Argument for Apartments

Land is a sought-after and very useful asset, whether for personal or investment use. This is why people attach significant value to owning land, and a standalone house comes squarely with the land below it. An apartment, on the other hand, needs to divide that land ownership with however many units or tenants are in the development. However, this doesn’t necessarily make an apartment a less attractive option because it comes with less maintenance, responsibility and hassle for you, tenants, or future owners.

Easier Maintenance and Security

Since apartments are typically smaller than houses, maintenance is usually easier. You have a smaller space to take care of and won’t have to do things such as mowing the lawn, garden landscaping (although you can do skyscaping to enhance your unit’s looks), or structural improvements. This also means less maintenance costs, although you still have to pay strata management fees for maintaining the building itself and communal areas.

Apartment owners can also find relief in the fact that apartments usually offer a degree of security to keep you safe. Safety measures such as guarded entrances, CCTV cameras, and on-patrol security guards give a sense of security tenants want and can be a major consideration for single women or people with children.

Workforce Demand

In an urban setting, apartments can provide greater rental opportunity compared to houses. Cities concentrate job potential and business opportunities, so a quality unit that sits close to the CBD will likely generate demand. Add all the entertainment and employment options an urban location offers and you’ve got a property that will appeal to more people, especially to the educated, upwardly mobile urban workforce.

Also, as apartments are smaller than houses, they naturally cater to younger renters who are starting out in their careers. Fewer family members and greater disposable income are attractive attributes in renters, and the statistics are showing that single-person households are on the rise in Australia, poised to leap from 2.8 million to 3.7 million by 2026 as more city apartments are constructed.

Get into the Market Faster

It’s not always the case but apartments are usually more affordable than houses. To give you an idea, according to Domain Group, the median price in Sydney for houses was a bit over $1.150 million while for apartments that figure is at around $740,000, as of March 2018. This means that it costs less for you to officially become a property owner/investor if you choose an apartment.

Going for a House

A house purchase comes with land ownership and not just the structure itself. This influences important factors when it comes to decision-making, such as the cost of the property, the investment market, and maintenance.

More Liberty

Buying a house means you are also investing in a bigger slice of freedom. In an apartment complex, you need to cooperate in the best-shared interests of the community, but sole home ownership means less restrictions on how you decide to renovate, decorate, or manage the property.

Of course, the downside here is the added maintenance work, which translates to more costs over time. But if you’re willing to accept that, the added liberty means you can renovate the property to make it more appealing to a particular demographic you want to target or keep in step with current design trends.

The Long-term Option

While houses usually cost more than apartments, they could be the wiser, long-term investment option. This is because land tends to appreciate over time, increasing the value of your property and your capital gains. Of course, this still depends on the location, so it would be best to research land value trends for the areas you’re looking at.

Tenant Stability

Families are usually inclined to choose a house over an apartment since it offers more space for children to play around in. Parents also don’t want to always be on the move and negatively affect their kids’ schooling or social life, so families tend to be longer-term renters.

As such, if you’re looking for longer-term renters, a house is a good choice. This lessens the hassle of having to constantly be on the hunt for new tenants and reduces the number of days your property is vacant and losing money.

The Bottom Line

There’s really no one right answer to the house vs. apartment question. Your decision and success will depend on a number of factors such as the location, market trends, upkeep, tenants, and how you maintain or renovate the property.

What we do know is this: to make sure you make the right choice, adopt a strategic mindset, do financial planning and calculations, and research. It also helps to gain valuable insights by consulting with experts.

If you’re struggling to make the right financial decision for you, whether it’s choosing an investment property or determining which loan package or lender best suits your needs, Clever Finance Solutions is here for you. With our experience and expertise, we’ll help you find a way and make the right choices for improving your financial situation, minimising risk, and reaching your investment goals. Set a no-obligation consultation with us today to know how we can help.

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