Apartments Vs. Houses: Which Should You Invest In?
How Can A Property Advisory Firm Help?
Searching for your dream house is a tedious task. Without sufficient research, you cannot wrap your mind around the fact that which type of property is a better investment. You often get stuck between going for an apartment or a single-family house. This majorly depends upon your lifestyle and the goals you’ve set for yourself.
Is it a rental property? Or do you want it to maximize your capital return? A lot of factors like your financial situation and maintenance feasibility also matter when investing in apartments or houses.
Factors To Consider When Investing In Apartments And Houses
Australia is known for its vast investment options when it comes to real estate. Buying an established property is a strategic and fantastic way to generate passive income. However, it is a long-term commitment. This may not be feasible for many individuals or families. An investment property helps in building equity for loans and is a visible asset. Hence, it is extremely important to consider some factors before investing in apartments and houses.
1. Nature of Return-On-Investment ROI
Investing in a property guarantees long-term prosperity. Therefore, you should invest wisely so that the ROI is satisfactory. The capital gained from renting the property helps in property management, loan paybacks, tax deductions and earning extra income. Hence the ROI or the rental yield helps you retain the property better and also service the bank loan easily.
2. Property Location
While investing in apartments and houses, the first step that one needs to take is to finalise their preferred location. Demand, property prices and the value of the property is always highly influenced by the location. Someone who is looking for a residence always prioritises the place’s closeness to schools, markets, hospitals and ease of transportation.
The real estate market is defined geographically. Moreover, location is important in terms of what a potential property signifies to the market. Hence, property investors should consider the location from a strategic aspect.
Investing In Houses
Finalising a property can become an overwhelming and life-changing decision at times. Investing in houses or any kind of property comes with its own pros and cons. Hence research should be done with due diligence. Houses bring more space, privacy and customization to the table. But also demand more maintenance and deposits.
Pros
1. Capital Growth As ROI
Houses offer larger financial growth in the long term. This is because land appreciates with time, and houses offer larger related land. It also depends largely on the location and housing market situations. But when we see on an overview, house prices increase faster on average than apartments. Hence larger ROI and more wealth for a house owner.
2. Scope Of Renovation And Customization
If you are too particular about the kind of residence you wish to build, then you should invest in a house. Houses offer complete control when you are the sole investor. You can customise it as per your choices when it comes to flooring, wall colours, decorative items etc.
Strategic improvements can also be made in a self-owned property to increase its ROI. Moreover, you don’t have to request permission from other residents or pay body corporate fees. Hence, owning a house allows you to renovate and subdivide the land without any hassles.
3. Cashflow Security
Houses easily attract tenants like professional couples or families with pets or children. They prefer houses over apartments due to the extra flexibility in terms of the lease and added benefits of lawns and play areas. Many apartments also do not allow pets or set limits on the breed of dogs or other pets.
As pet owners tend to have a longer tenancy period, they serve as a constant and secured cash flow. Hence, for families and pet owners, investing in apartments is of low priority.
Cons
1. Higher Initial Investment
Purchasing a house takes a bigger hit on your pocket than an apartment. This is a deterrent factor when it comes to first home buyers. For people who wish to diversify their portfolio of investment or earn more Australian credit, investing in houses comes out to be discouraging at times.
Houses have a higher price range due to total ownership and the extra amenities it offers. The price range also depends on the location of the house you plan to purchase.
2. Low Rental Yield
The amount of capital you can make on a property as compared to the price you purchased it for is known as the rental yield. Houses do have a higher capital growth. But as compared to apartments, they have lower rental paybacks.
This is because investors prefer to invest for capital growth. In the long term, selling off investment houses will bring them more profit than the yield from rents. Hence houses might not be the best rental income option.
3. Higher Maintenance Costs
When houses are in consideration, all the maintenance costs and upkeep fees come to the owners head. Since you plan on maintaining the appearance of the house as it speaks for your image. The owner also has to pay the insurance premiums for the whole building. Hence, maintaining a house can anytime cost more than an apartment.
Investing in Apartments
Apartments tend to be the right choice when it comes to first home buyers or property investors. They offer more amenities but provide lower privacy too. Looking beyond the affordability, one should definitely dig into any downsides that might come with it.
Pros
1. Affordable Initial Investment
If you want an affordable market entry point, apartments are the right choice. They tend to fit your budget in terms of housing in areas that have higher house prices. Moreover, the less space in apartments accounts for cheaper electricity and gas bills. And they also provide more facilities in the same price range.
2. Rental Yield as ROI
Apartments come with more facilities and less maintenance in the same budget. Therefore they are seen as good investments for corporate couples and bachelors. They prefer residence for shorter time intervals due to future uncertainties, and apartments provide them with everything under one roof. Hence, as apartment owner occupiers, you can easily rent them and yield a solid ROI.
3. Low Maintenance Costs
An added advantage of investing in apartments is that all the residents of the building share insurance costs and upkeep dues under strata title. The common areas and other building services are maintained by a body corporate. Hence, it doesn’t become a burden for the residents to look out for everything on their own. Therefore, an apartment is easier to maintain due to divided management and less space.
Cons
1. High Strata Fees
High rise apartments have far more amenities that you can use. This leads to you paying high strata fees. You are not only paying for the amenities you use but also for the ones you might not use, like swimming pools, gyms or tennis courts. Paying for some unplanned repairs can also be expensive and may not fit your budget. This, in turn, pushes up the vacancy rates of costlier apartments.
2. Less Flexibility For Renovation
Apartments are a part of the strata title. Hence, you need permission from the body corporate for any renovations. This keeps your hands tied when it comes to making changes in the apartment. The lack of complete authority and control in renovation puts limitations on your use of the property and can decrease its value.
3. Tenant Management
If you plan to rent out your apartment, it may cause some hassle. Since renting apartments involves lots of paperwork and other formalities, even for minimal damage repair work, it can get tiring at times. Due to lack of controls and high maintenance costs, it is difficult to find the right tenants.
How Can A Property Advisory Firm Help?
We see that investing in apartments involves various factors, such as searching the right location, finding the fit in your budget and knowing all the crucial rules and regulations. Hence taking guidance from a property advisory firm like Quarter Acre is crucial.
From advising on property laws, interest rates on loans to chalking out paperwork, a property advisory firm makes your investing process smoother and easier.
Moreover, the firm helps you find the best deal in your budget. Hence, a property advisory firm not only assists you in new purchases but makes sure all your needs are matched. Therefore making property purchases easy and convenient.
