House vs Apartment – Which Is Better for Capital Growth?
Many property investors favour one type of property – either apartments or houses. While there are pros and cons to both, which we will discuss here, one of the often forgotten advantages of houses is the investment you’re making not only in the bricks, but also in the land.
Land value in itself increases over time, and investment in a piece of land also provides opportunity to renovate, subdivide and develop, all of which lead to greater capital growth.
But, with land investment, also comes time, money and skills.
So, what’s the best path to go down?
First, let’s weigh up the clear pros and cons of different property types for different property investors.
HOUSE AND LAND INVESTMENT
Opportunity for higher capital growth – depending on market conditions
Strategic improvements e.g. renovations, subdivision, development
Depreciation of the structure of houses
Generally lower rental yield
Higher maintenance costs
Generally higher rental yield – good for cashflow
Easier to hold – a strata manager is responsible for the upkeep of the building
More affordable options available
Lack of land value impedes capital growth
Limited renovation opportunities
Some markets are oversupplied
Banks can have stricter lending policies
HOW DO INVESTORS CHOOSE THE RIGHT INVESTMENT PROPERTY?
While all types of property have good and not-so-good aspects, there are some key decision-making factors that are the same for any property type.
Can I afford this property? – Know your numbers. If you can’t afford the deposit, the loan repayments, the taxes you’ll pay, the agent’s fees and any renovations you’ll need to do to ensure good rental income, don’t buy it. Speak to a lender or mortgage broker who can help you work out what you can afford.
Is the location right? – Quality location is one of the golden rules of real estate investment and might be a deciding factor in choosing the style of property you buy. If you know the location is right, but can’t afford to buy a house, an apartment might still allow you to own an investment property in a flourishing area.
Is there enough growth opportunity? – If you’re keen to maximise capital growth from every investment, one of the huge advantages to houses and land investment is the potential to expand. Investing in land means you can create multiple income streams via subdividing, developing or rebuilding. This tactic is only really possible with house and land investment.
BUILDING A DIVERSE PORTFOLIO
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Many property investors favour one type of property – either apartments or houses. While there are pros and cons to both, which we will discuss here, one of the often forgotten advantages of houses is the investment you’re making not only in the bricks, but also in the land. Land value in itself increases over time, and investment in a piece of land also provides opportunity to renovate, subdivide and develop, all of which lead to greater capital growth.
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