Should You Invest in a House or in an Apartment?

Tuesday 16 Apr 2019

One of the main issues facing investors is whether to buy a house or an apartment. While there is an emotional component to the idea of a house – it is the great Australian dream after all – the practicalities aren’t always ideal. When looking for an investment property, the key things to consider are location, affordability and ongoing costs such as maintenance, body corporate fees, and/or rates. Choosing a good location may seem like an obvious point, but many investors get too focused on where they would prefer to live, rather than which location is best to invest in. What’s important is that property prices are achievable for your budget and the area is delivering good rental yields. A large suburban home near a major university for example, may be the ideal share home for local students, plus you have a regular supply of tenants as long as the university is operational. Conversely, apartment living has trended much more strongly in the past couple of decades and the average occupancy according to the last census was 2.6 people per household. This makes a 2-bedroom apartment a pretty stable proposition, especially if you can find something within your budget and within up to 10 kilometers from a major city. This offers you good rental yields as well as investment growth potential. If you have a particular area in mind, you’d like to invest in, it’s well worth finding out what types of property have sold well there over time, as this could indicate a long-term trend that may well be the norm for that location. The investment potential is the final part of the equation and your choice here will really be influenced by what your long-term property investment goals are. In the case of an apartment, the bulk of the growth potential may be in the building itself, rather than the small piece of land it sits on. When purchasing a house, the land itself becomes the greater part of the asset in many cases, which is how some investors make significant capital gains.