The apartment vs house has been a great debate for a long time. Choosing between investing in an apartment or a house all depends on you as an investor – your financial situation and what your property and overall financial goals are. Everyone has different preferences and objectives. While some prefer to invest in the quiet suburbs, others prefer to own property in the inner-city. In some markets, investing in a house may be a better option, whereas, in others, an apartment can also be attractive to investors.
So, which one would make a better investment property? We have helped narrow down some clear advantages and disadvantages for both investment property types that will suit your personal and financial situation:
APARTMENT INVESTMENT (OFF-THE-PLAN)
Because most of them are built in the inner-city area, apartments tend to be appealing to many young Australians who prefer to live near work, closer to shopping, universities and to enjoy the city night life. Therefore they can be attractive to younger tenants or even young single professionals. Investing in apartments can also be a popular option because they usually require less responsibility when it comes to repairs and maintenance because the body corporate looks after it, of course at a cost (which can be significant). Body corporate fees should not be forgotten about for investors which cover amenities of the building such as gyms, pools, gardens and common areas. Some investors also see the benefit of investing in apartments for the capital growth they may offer within city fringes, which in some projects and areas has certainly been true.
HOUSE INVESTMENT (OFF-THE-PLAN)
The main advantage of investing in a house is that you have ownership of the land, which is the main driver of capital growth. Generally, houses are also more appealing to small families which are the dominant demographic in terms of the population growth across the country, making the property more appealing to tenants. Investing in a house also provided you with the freedom to do what you want with it – such as renovations that might help increase the value of the property. Unlike an apartment, investing in a house means you don’t have to pay for strata fees, but all the maintenance and repairs are your own responsibility.
LET’S COMPARE
When comparing the two options as an investor, a house has several more advantages and is generally regarded as a stronger long term investment. With an off-the-plan house investment, there is no stamp duty on the build, just the land, so there is a nice saving there compared to apartments that attract full stamp duty.
Because of the land ownership, houses will generally offer higher capital growth potential for investors in the long term, whereas apartments that have no underlying land ownership is relying more on the rental yield to get a return. With house and land, the rental yield is normally in the 4-6% pa range, however, with apartments they tend to yield more in the 2-3% range, which over a 5-10 years basis can make a substantial difference to the cash flow and returns for the investor.
With a house, you also get more for your money as a general rule. For example, a $500,000 house and land package will normally get you four bedrooms, two bathrooms, two living rooms, and some backyard. Whereas with an apartment, that same investment amount may only secure you a small two bedroom, 1 bathroom, 1 living space property. Finally, from a tax perspective houses will normally be more effective due to the greater depreciation deduction that is available. This is because new and bigger houses contain more plant and equipment assets such as carpets, blinds, ovens and dishwashers that are higher in value – which in the end, can result in higher tax deductions than an apartment.
Need help getting started? iBuyNew will point you in the right direction! Whether you are looking for apartments, townhouses or house and land packages, working closely with an iBuyNew property consultant, who understands the market, will help you find something suitable that’s tailored to your needs and requirements. Get in touch with them on 1300 123 463.
1800 184 284
