Say there are two options, a house at $100000 and a unit at $50000. Both return 10% and net 2% cash return. Which is the better investment? Basically, for completely even returns, what are the pros and cons of each? What do you prefer?
I’m inclined towards units atm because i’d be investing from out of state (and country). But do houses appreciate more? What other factors weigh in?
Thanks in advance.Hey Superman!
Interesting question!
I’d be inclined to go for the house, unless the unit was a stand alone or I could acquire all the units.
The reason why is that I have found that dealing with body corporate issues and other tenants is far too time consuming!
Still, you’d also want to look at the cash on cash return which on the unit is likely to be better as it is less cash down on a 20% deposit basis.
As for appreciation, land appreciates and buildings depreciate, so if you are looking for capital growth then go for something with land.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
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Hi Superman,
I’ve recently been pondering that same question, as I’m at the stage of researching my first IP purchace.
You’ve made the assumption that you are going to invest out of your state (for less stamp duty?).I was more inclined to invest within an area that I could easily drive to within 1 day in case of repairs/disasters etc.
Another reason to buy house/land I could see more potential to spend a little on improvements to gain a lot in rent.eg say a 4br 2 storey home that could be easily split into 2 flats.
Flats on the other hand are a lot more inflexible, but appear easier to maintain.
Land tax treatment of house v’s flat seems to favour the flat too.
Anyway I cannot speak from experience but I’d love to hear from someone who can and perhaps let me know if these ideas are on the right track.
Best of luck
Dave.Hi Superman,
Steve’s pretty right about the unit situation. One of the first units I bought was in a block of 9 and a second in a block of 4. Both acquired at the same time on investment loans. I was eventually able to obtain the other 3 and gain control of the situation completely. The other one has provided the odd headache but nothing too major. The pros and cons of buying a house or a unit are endless. You have to go with what you think is right. I have houses and units and have ear marked certain units as my emergency sale options as generally they are cheaper and can be easier to move if you are in desperate need of money. I haven’t actually had to sell any, but on a few occassions when I thought finance on other properties I wanted to obtain wasn’t going as well as I liked, I placed a couple of for sale adds to see how the market was going and how quickly I could move a unit or house if needed and found the units attracted more interested. This is not going to be the same in all situations, but appears to be mine. I think one of the keys to your investment situation is finding a good property manager. This has been discussed on other forums.
C
Superman,
My instant 2 cents on this impossible to resolve subject is…. units.
I have 1 unit and 1 flat, plus the house I live in all here in Melbourne.
My personal preference is units / flats because I enjoy being involved in the Body Corporate. As a member of the body corp – and preferably “chairman” – I can get the other owners to pay for improvemts to my ( and theirs as well ) properties !
Steve is certainly correct in that dealing with the body corp and therefore other tennants can often take up some time. However, my experience is that the body corp “looks after” repairs/ renovations/ improvements / gardens / etc. If I have a certain ammount of control or influence over the body corp then this directly improves my investments, and indirectly the other owners investments as well.
Houses ( with land ) can appreciate in value more than units, but not always. There are no real “common areas” that are the responsibility of anyone else other than the owner ( except maybe the fence ). Therefore, in theory, there is more to go wrong, and only the owner is responsible for fixing the situation.
Having said that, I plan to buy a small house next time, but I forsee that I will own more units / flats than houses in the future.
I also fully understand that others have different opinions. There is no right or wrong here. This is purely my situation.
Good luck with yours !!
Thanks,
BDM
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