Property Investing: Houses Vs Units

StructureHey mum CFOs!

Today I wanted to talk about a question that gets debated a lot so I could share my own research and hopefully save you the bother!

“Property Investing: Should I invest in a house or a unit in Australia?”

First of all… a bit about me. I am not yet a property investor. I am in my early twenties, run my own business from home, and am busily saving for my first investment property. I have done a lot of research on the topic for myself, and have also worked in the property investment industry, so I am pretty confident that I can answer this one… but I’ll let you be the judge!

I’m not going to lead you on here. According to my research, you should invest in a house over a unit.

There’s quite a few reasons why I think this is the best option.

 Land Values

The most obvious point here is that land is what goes up in value over time, not the actual building. In fact, everything but the land depreciates over time! If you purchase a unit or apartment, you own very little land compared to if you’d purchase a house on its own independent block.

Demand for housing will continue to go up for various reasons (the population is still growing), but we can’t actually make more land. In particular, certain locations that are in demand are extremely limited on land (surrounded by water, already built out, national parks, zoning, etc.), and if you own a house in those locations, you’re much better off than owning a unit.

Yes, Australia has a lot of land. But there is actually very little available land for residential growth in areas that are in demand. So it is better to purchase a house over a unit because your land is valuable!

 Body Corporate

Ugh, body corporate. The unfortunate thing about purchasing a unit is that you sign up for rules, fees, and a number of other things that you don’t have much control over. Body corporate fees (and management) can really eat into your profit and time. What can initially look like a pretty good investment can suddenly seem not-so-great when you find out about body corporate.

Keep in mind that this also limits what you can actually do with your investment. Want to renovate? Modernise things a bit? Add value? You’ll have to get approval for that first.

The good thing about buying a house is that you can pick and choose your services and associated fees. You also don’t have to get someone else’s approval for changes like a new coat of paint or an air conditioning unit.

 Stability

Houses tend to be a lot more stable than units for investors, in more ways than one. Although unit prices can escalate very quickly, houses tend to go up in value at a more consistent pace over time.

In general, more people want to live in separate dwellings, although this trend will depend on the location you are looking at. This means that houses appeal to the majority of people. In turn, this ensures consistent demand, and lower vacancy rates. Ensuring stable cashflow for your investment through consistent rent and low vacancies is one of the most important factors to look at when deciding on what kind of property to invest in. Because houses tend to be more stable in terms of demand, you can also expect more stable cashflow.

Of course, there are lots of other factors involved that go into making a good investment. This article doesn’t cover important things like location, new vs old, commercial vs residential, etc. Some units are actually going to be better than some houses. But in general, I find that it is better to invest in a house over a unit when you are looking to get consistent growth over a long period of time.

 

Over to you…

Do you agree with these points? If you’ve purchased an investment property recently, what made you choose a house or a unit? And for those of you who own both, are you finding that the house is the best long-term option so far? Perhaps times are changing – I’m happy to be proven wrong here!

I’d love to hear your experiences in the comments below or feel free to start a discussion on the Facebook group.

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