As a qualified real estate appraiser, buying broker and active real estate investor, I have evaluated, bought, renovated and managed numerous properties and properties for property investors across Australia.
I am constantly asked the question:
Is it worth buying a house or an apartment? Which real estate investment is most effective for my real estate portfolio?
So I thought I could put together the pros and cons of investing in housing compared to investing in an apartment.
Purchase of real estate such as apartments, villas, townhouses, apartments as investment property:
Usually cheaper than homes in the same investment zone
Generally higher returns (due to higher demand from smaller households with low levels of service and less initial financial structure)
Generally lower requirements and maintenance costs
Most drive blocks have strict security, i.e. secure drive blocks or private access.
Many modern blocks have excellent amenities such as gyms, swimming pools, gardens, etc.
Often located close to the city center and are in demand with amenities, services and lifestyles.
Paying for Strata can be expensive.
It may be more difficult to make a significant profit from repairs because repairs may be limited, especially outside of an object over which you have limited control.
The development of the property is almost impossible, unlike the house over which you are completely in control.
Refinancing to increase and reinvest capital can be difficult, especially if there is a construction problem, even if it doesn’t directly affect your unit.
Some condominiums have gyms, swimming pools, etc. and floor fees can be significant. If apartment buildings have facilities such as a pool or elevators that can be personal ‘pros’, this is often a financial ‘lack’ as these facilities require more continuous maintenance, therefore, higher costs and usually less capital gains.
Often located in areas with high population density
Buying houses/homes as an investment in real estate
A large area of land that is ideal for capital growth
More living space (yards, living rooms, etc.)
Creative control over the entire property, so repair and development is easier because of better control over the investment asset and usually more value added compared to the cost of renovation or development compared to apartments.
Usually in low-density areas
Traditionally, lower rental income due to the larger land component
It is not often possible to find (or not at a price) near the inner ring of the CBD, where there is the highest capital growth.
More service is required (which may mean higher operating costs and therefore less cash flow from specific real estate investments)
It is easy to benefit from value-added projects, so you need to be an experienced real estate investor who understands the details and process of real estate development and repair before you start. It can be quite expensive both in time and in money.
After reading the pros and cons above, you’ll probably have a firmer opinion on what to do next. It is important to understand that this depends on your overall life and your investment plan, not just on the next transaction, because at Capital 360 we develop a real estate portfolio strategy for investors for a period of 10 to 20 years, and it can be a combination of units and houses depending on part of the investor’s life cycle.