Investment Properties: Does Size Matter?

What kind of property should you choose to invest in – a home or an apartment? It’s one of the most commonly asked questions from investors. Like most things, there are different answers for different scenarios and none of them is right or wrong.

It’s important to remember that the type of property you buy will have an effect on your rental returns and your capital growth, so you must carefully evaluate each option. It’s advisable to do some thorough research before you begin. Identify the area you’re interested in and find out information about the common dwellings within that area. Find out about the people who live in the area: What do they do for work? Do they travel? Do they have school-age children? Having an idea of what people are looking for will help you identify a property that will be in demand.

Weighing the pros and cons

Both apartments and houses have their own strengths and weaknesses. Which option is right for you?

Apartment pros:

• Generally cheaper to buy.
• Fixed costs (body corporate fees, for example).
• Less maintenance required.
• In most cases major repairs are paid for by all of the owners in the complex.
• Smaller or no land tax bill.
• Inner-city apartments are attractive to those who work in the CBDs or regional hubs.
• Closer to retail centres and entertainment precincts.
• Generally have good transport options close by.

Apartment cons:

• Strata fees – you must pay them to cover the maintenance and repair of the complex, and they can be substantial.
• Your hands are tied concerning things like improving the property or maintenance.
• Your investment doesn’t include land.
• If your tenant requires or requests maintenance, you have to pay for it (unless the repair is to common property).

House pros:

• Houses include land, and land drives the increase in value.
• Land appreciates at a rate of 10% per annum.
• Larger likelihood of capital growth.
• Houses generally attract a higher rent.
• Houses are attractive to all types of people, from a single occupant to large families.
• You can do whatever you like to the house – renovate it, subdivide, knock it down and rebuild.

House cons:

• Larger upfront investment.
• Owner is liable for all maintenance and repairs.
• Owner is responsible for upgrading the property and the features inside it (like stoves, heaters, hot water systems and air conditioners).
• Returns are dependent upon finding good, reliable tenants.
• Necessary to rely on tenants attending to property upkeep.
• If your tenant requires or requests maintenance, you have to pay for it.
• Owner must pay land tax.

Have you made your decision?

The type of property that you decide to invest in should be in line with your investment goals. You must investigate all the potential options and decide on their merits yourself. Either option – house or apartment – may suit, but how well will depend on factors like location, suburb demographics, and returns, which are dictated by the market. A careful initial evaluation is important.

It’s also imperative that you seek professional advice prior to making any investment decisions. Need help? ParkTrent is Australia’s largest privately owned real estate company. We provide a full range of services from buying a home or apartment through to property management and growing your investment portfolio. How can we help you?