Should I invest in a house or a unit?

This is a question that comes up from time to time and the better question is, what property investment is going to give me the better return in the long run and have the lowest holding costs?  This is the better question to ask, regardless of the kind of property you’re looking to invest in.

Arguably, one of the biggest changes to the Australian property market in the last decade, has been the change to our lifestyle, and the kind of property we like to live in.

Not long ago, it was desirable to own your own piece of Australia that came in the form of a quarter acre block.  It was typically a brick or weatherboard dwelling, 3 bedrooms, 1 bathroom, a garage large enough for one car, a front yard that was usually decorative with the letterbox at the end of the driveway, and a good back yard with a hills hoist clothesline out the back.  The house was situated in the suburbs, close to schools, playing fields, local shops and church.

These days, there is less value placed on the above kind of property, and more value placed on living close to the city in a low maintenance dwelling. We’re more time-poor, which means we don’t want to spend our weekends mowing lawns and clearing gutters.  We’re more likely to outsource basic services such as cooking and cleaning too and want to be close to cafes, bars, restaurants and entertainment.

This has meant a change to how we should also view investing in property, as you need to consider who is paying for your investment?  The people renting your property in the capital cities in Australia are Generation Y and, to a lesser extent, Generation X.  They want to live in a low maintenance dwelling, close to lots of amenity and don’t want to spend any time looking after maintenance requirements of your property.  This is clearly evidenced by the greater rental yield that is being achieved by units over houses in every major market in Australia. 

The structure under which you are investing in, is also important.  Most investors are looking for ‘set and forget’ type properties.  Properties that have low holding costs and require little involvement from them.   This is most easily achieved in unit and town house developments. 

We see, time and time again, that second hand houses are the most problematic investments in terms of involvement and potential interruption to income and value.  Despite building inspections and pest inspections, we’ve seen too many investors get stung with structural problems and pest infestations that lead to tenants either moving out, needing to be compensated with rental discounts and unexpected capital expenses to fix things like foundations and roofing. This is especially significant if your investment is through your SMSF as any decrease in the value of the investment could lead to not being compliant as directors. This is a specialist area that requires specialist advice, but something worth noting when considering what kind of property to invest in.

The research that we conduct at Calla Property is extensive and beyond what is readily available to the consumer.  We buy research from respected, established property research houses and forecasting agencies to ensure that we get it right for our clients.  To take the guess work out of investing in property, call 02 9016 2852 and make an appointment to get started on building your investment portfolio today.