Hi,
I am wondering what differences there were in having an investment unit or investment house.
Do houses appreciate more because of the land?
Land Tax?
Better rental on units?
Less maintenance on units?My personal aim is to have several investment properties, mostly positive geared to help pay off PPoR. I would like to start this later this year when the wife is back at work from maternity leave.
Your thoughts?
– Mark
Hi MArk,
Ultimately it is the basic economic law of supply and demand, and your individual circumstances and beliefs, that determines which property is best.
Most people would argue (and stats tend to agree) that house appreciate more than units because of the increased proportion of the buying costs in land value – subject to location issues.
Land tax is a state tax levied on the land value and varies significantly from state to state and as such a visit to your state revenue department would be advisable. As it stands at the moment your own home is free from land tax.
Units are generally managed by a body corporate (or similar) and as such there are some advantages to being part of a collection of owners. You can run into management issues when there is a conflict between owner occupiers and landlords in the same complex. The conflict generally arises as the respective needs are slightly different.
Derek
[email protected]Read my comments? Think I can help you? PM or email welcome.
Personally I dont like units. There is an over supply in some areas, and also vacancy rates can be higher. depends on where you look.
I also dont like all the fees, I have a preference for free standing homes. Just my personal opinion though..
Elves
” a blind man may see what a sighted man may not”
The greater the land component (all other things being equal) the greater the capital appreciation.
As a general rule, house prices are higher than units. The lower price points of units may be of advantage to you.
Units are not to be confused with apartments.
Maintenance is not intrinsically higher on units, it will depend on the age, construction and general quality of the building.
My advice would be to buy a house, subject to due diligence, over a unit. (Due to land component)
James
James
Thanks for the good replies,
– Mark
units u lose your independance.
renovation time u have to fork out and
may lose all your +/cflow.All that said..
I have a friend who purchases only units/apartments and has 8 so far his partner has 3 and they manage and source tenants themselves.
These properties are usually cheaper than houses ( due to land content ), he says easier to rent, no gardening problems etc..
Ultimately, it’s what best suits you..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Originally posted by elves:Personally I dont like units. There is an over supply in some areas, and also vacancy rates can be higher. depends on where you look.
I also dont like all the fees, I have a preference for free standing homes. Just my personal opinion though..
Agree, and also that, because units all look a like and have similar rents, its very hard to increase the rental, even when demand is high or low… they all sorta have to go up in rent together… other than that the fees, i dont like either…
Cheers,
sisthere is a school of thought that the changing demographic will alter the old adage that higher land content will show higher capital growth. The ageing population is a permanent alteration to the housing market. In Perth we are seeing very high growth rates in inner city apartments as this is what the market wants, where as some of the single residential older suburbs with the 1000sqm blocks aren’t doing a great deal e.g. Floreat which never seems to move significantly. I think try to have an each way bet with an apartment that has a highish land value i.e. small apartment complexes, townhouses.
Extensive list of new Perth property available for sale.Alternatively, become a joint venture partner in one of our property development partnerships – contact me to find out why our developments are unique. John – 0419 198 856
Let me give you the benefits of some of my hindsight.
1997 Unit was $90k. In 2004 its now worth $250k ie Net = $140k
1997 House in a few surburbs further south from the unit.
Was $130k. In 2004 its $350k ie. Net = $220k.If I had bought a house in 1997 instead of unit I would now be $80k better off.
Why I did not at the time;
1. There was a greater gap between rent and interest for house ie. Needed more of my own cash flow.
2. a unit was easier to maintain ie body corp did it.
3. the location was probably better for unit.What would I do if it was 1997 – buy the house!!!!!!!
There’s always the possibility of a duplex. The advantages and disadvantages are midway between houses and units.
Like a unit they may be on a strata title, but there’s no body corporate fees. They might be as big as a house inside. The chance of the next door one being for sale or rent when yours is is low. But you can’t dramatically value add (or demolish) like you can a house unless you bought the other half.
Yes the land component is smaller than a house in the same area, but (as John Fitzgerald points out) the land component of a duplex in an inner area might be worth more than the land component of a house in an outer area.
If you’re buying mainly for cashflow the land component is less important, especially if your tenants will be high income working people who don’t want a big garden.
I don’t like large multi-unit developments, as the chances are that one will be for sale or for lease all the time. This would limit the rent or price you can get, no matter how nice you make it inside.
But if you’re willing to pay the body corporate fees, a unit in a small group of 4 might be OK (and was my first IP).
But my subsequent ones have been duplex halves, which I found gave better yields than houses in the same area.
Peter
Originally posted by yack:
Let me give you the benefits of some of my hindsight.
1997 Unit was $90k. In 2004 its now worth $250k ie Net = $140k
1997 House in a few surburbs further south from the unit.
Was $130k. In 2004 its $350k ie. Net = $220k.If I had bought a house in 1997 instead of unit I would now be $80k better off.
What would I do if it was 1997 – buy the house!!!!!!!Yack, I disagree with your ‘figures’…..
The unit has increased in value by a factor of 2.77, whereas the house has increased by a factor of 2.69. So on that basis, the unit has made a better return.
They have unequal starting prices, so I think you can’t just look at the ending prices to compare the level of profit. Especially when you take into consideration the different rental returns over the period.
Cheers
Mel
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