House, Apartment Unit, or Townhouse – Which is Best for Your Portfolio
The type of property that you invest in will impact your success for better or worse. Discover the pros and cons of the most popular property types in Australia.
As a property investor, you’ll have to make many decisions. And the type of property to invest in is going to be among the first and most important decisions you’ll have to make.
In most cases, you have a choice of three options: a house, a townhouse, or an apartment unit.
Now, there are a number of things that will contribute to your final decision, such as your budget, desired location, and goals. Each of these property types comes with a set of benefits and drawbacks that you’ll have to consider.
For instance, if your budget is tight and you have to buy in a big city, one of the property types might be out of the question unless you loosen your constraints.
In any event, knowing the pros and cons of each type will help.
The Pros and Cons of Investing in Houses
For owner-occupiers, houses are the most popular type of dwellings in Australia. And the benefits are plenty.
To begin with, houses offer better flexibility than the other property types. It’s primarily because of the individual title, unlike the shared title that apartments come with.
The rules and regulations are not nearly as strict, especially when it comes to renovation. When you buy a house, you can do pretty much anything you want with it, as long as you comply with council regulations.
In addition, houses are more attractive to families in general than the other property types. So, if your target audience consists of working families, it’d make a lot of sense to invest in a house. The family can have access to more space and privacy than they would in an apartment.
Of course, these advantages come at a price, which can be much higher. With all else equal, houses are the most expensive type of property in Australia. In the same area, the median house price could be higher by 20% or more than the median apartment or townhouse.
Another drawback of houses is that they require a lot of maintenance. It would include maintenance work, like gardening and plumbing, which can all add up to costs. Not to mention that some repairs can be a lot more expensive.
The Pros and Cons of Investing in Apartments
Apartments are individual, self-contained units within a larger residential complex. They’re on a strata title, meaning that an apartment belongs to the owner, but not the shared spaces. Rather, all owners assume shared ownership of them.
Now, apartments can amend many of the issues that come with investing in a house. They’re the cheapest of the three options, assuming everything else is the same. Not only that, but the availability is much higher than houses in most property investment hotspots. That’s due to the better space utilisation of high-rise apartment buildings.
Besides, apartments usually have more amenities on- or near-site than houses. A modern apartment building often includes gyms, coffee shops, grocery stores, and other conveniences within walking distance.
On top of it all, apartment owners and tenants don’t have to do a lot of maintenance work. This is especially true for the outside space, which the average house owner would have to take care of.
Even though apartments are cheaper to purchase, they do come with additional costs compared to houses. Strata fees, for example, are the responsibility of the owners for the upkeep of the shared spaces such as halls, stairs, and gardens.
Another drawback is privacy, which apartment dwellers have to sacrifice. They share common walls, including the floor and the ceiling, with the neighbours, and with many of them on the same floor. As a result, some buyers and tenants may be more open to living in houses than apartments.
The Pros and Cons of Investing in Townhouses
Townhouses are terraced houses that mimic the design of standalone houses, except they’re connected to neighbouring townhouses on both sides. Like apartments, they’re also on a strata title, but the owner does have sole ownership of the piece of land that the townhouse sits on.
In terms of benefits and drawbacks, townhouses are right in the middle of standalone houses and apartments. Townhouses are more affordable than houses, given the same area and sizes.
Also, townhouses don’t come with any shared areas. The only reason for the strata title is the shared land. Because of this, townhouses offer more privacy than apartments. You might be able to pull your car up to the entrance of the townhouse, for instance. Your buyer or tenant may appreciate this privacy.
On the other hand, a total lack of individual flair is a drawback. For the most part, townhouses are a row of houses that all look the same. You’re not allowed to make any major changes to the exterior in most cases. You might be able to carry out some interior work, but you’ll probably still need approval for that.
Another drawback is the typical lower capital growth than standalone houses. The resale values of townhouses are closer to those of apartments than houses.
As you can see, each property type can benefit you in its own way. Depending on your target market and investment goals, one may be better than the others.
Of course, this also means that a specific set of challenges comes with each property type. These challenges also can be quite costly so you’re going to have to consider your budget when making the decision.
But you don’t have to make this choice on your own. Contact us today and we can point you in the right direction regarding property types and more.