When investing in real estate, several tough decisions need to be made. One of the most significant decisions you will make as an investor is choosing the type of property you want to invest in, a house, unit, or even townhouse. Like all decisions, each option will come with its advantages and disadvantages.
To make the right decision for you, it’s imporessentialnderstand what you are trying to achieve with your investment and understand the pros and cons of each option. Generally speaking, most investors who purchase a unit will do so as they have a higher yield and are easier to hold onto. At the same time, owner-occupiers are more likely to be buyers as they are significant, more significant-excellent places for families to grow.
Investing in Units:
Pros
Units are often more appealing to investors because they are cheaper in their initial price and generate higher rental yields. The lower initial costs make them easier to purchase and manage repayment costs, as rental income is often higher than the mortgage repayment price.
Generally speaking, many units have achieved 4-5% yields, while houses in comparable locations may be under 2%, making units an investment beautiful.
Another advantage of purchasing a unit is that it provides the opportunity to buy into a highly sought-after, which h may have been otherwise unaffordable if an investor was looking at houses only with the same budget.
Many inner-city metropolitan areas that to water or amenities are often priced well over $1 million in almost all states in Australia. Comparably, units in the same area site are under $500,000, which is far more affordable for an investor on average wage with limited serviceability.
Cons
The general rule of thumb regarding real estate is land = value. The land is scarce, particularly in capital cities and large metropolitan areas.
Houses occupy more physical land, thus their increased cost. As units occupy less space, they are in abundance compared to house homes. This lack of scarcity can decrease your capital growth over a long perioperiodld you wish to purchase a unit.
It is worth noting that not all units are the same. Directly comparing one unit with another could be comparing apples and oranges. One team in a block of three units vastly differs from a unit in a league of 300. You can see which of the two is a better investment based on scarcity alone.
While yields on units are generally higher, strata (also known as a body corporate) fees must also be factored into calculations as they can significantly impact the overall yield outcome many instances, complexes with great features such as pools and gyms come with sky-high strata costs, which can then make them a similar yield to a house.
Regarding price movements, units are the last to rise and the first to fall during a growth cycle.
Hous.es
Pros
The most obvious advantage when ofhasing a house over a unit is the land scarcity factor. As Mark Twain once popularly said, “Buy land, then; they’re making it anymore.” This rings true, especially for inner-city areas; as a result, populations rise, and demand is ever-increasing.
Over long perioperiodsses have been proven to outperform units in capital growth, and we expect this trend to continue long into the future.
PartiMainlye the COVID-19 pandemic, research has found more than ever tha people are opting for houses with access to a backyard and fresh air ratheinsteadit of limited space.
A sizeable significant component also provides opporan unity to develop further or subdivide, which is another way to manufacture equity that it simply cannot do.
Cons
Just like units, not all houses are equal. A brand new home in an estate 50km from the CBD is not the same as an inner-ring established suburb.
Houses in housing estates are not that different from large off-the-plan apartments. There can also be considerable significance associated with holding houseplacesecially when it comes to older homes requiring large amounnumberepairs. Generally speaking, the best investments are a combination of all of these factors.
Units in established locations in small blocks with low to no strata fees are often great investments. Similarly, houses in estabdesignateds with higher yields are also great investments, particularly when there is room to renovate, develop or subdivide. These are usually merely sought-after types of property.
Both units and houses have various pros and cons; the final decision is highly dependent on the investor and their specific goals. Ultimately, there is no “one size fits all” when investing in property!
