Should your next investment be a unit or a house?
When it comes to your next investment, your eye should always be firmly on likely tenancy demand, proximity to transport and jobs, and the potential to add value over time. So, which is best for investors? A house or an apartment?
With Sydney and Melbourne’s housing markets having recorded their first months of growth since the market peak, we see yields being compressed and investors considering alternative options. Regional markets have shown considerable stability through the recent downturn, with regional NSW showing yields upwards of 4.7% and the regional Northern Territory as high as 7.1%
So, as an investor, how do you choose between a house and an apartment? A 3-bedroom house in a regional area could well be a better opportunity for you than a small inner-city apartment. Houses tend to more frequently attract families and that can mean longer tenancies than with small apartments.
Plus, ultimately, houses tend to offer more opportunity for differentiation than units, and that means more potential for capital gain in the long-term. Find one with a poorly presented garden and interior and you could be on a winner. Rip up the carpets, polish those beautiful timber floors hiding underneath, ditch the ugly curtains, renovate the kitchen and bathroom, and get planting in the garden and within months, you’ll be offering an entirely different proposition to prospective tenants.
While apartments may be cheaper overall, there is something to be said for the security of investing in a house when you’re an investor. There are risks in investing in an apartment today – more so than ever before. Some apartment complexes can deliver less than 10 years of solid value to their owners, before they turn into money pits, as shoddy workmanship and hasty construction start to reveal themselves. In addition, fears about the potential rectification costs of combustible cladding remain a relative unknown.
When looking for your next investment, the key things to consider are location, affordability and ongoing costs such as maintenance, body corporate fees, and/or rates. Once these things have all been taken into consideration, you can weigh the potential of the extra rent that can be asked as you add value through renovations.
Never hesitate to ask one of our team for an opinion on any property you might be considering as an investment locally. We can make recommendations on the improvements you’d most need to make to achieve the highest possible yield from your property. Plus, we may know of other already tenanted properties other clients may be considering selling.