For most of us, owning our own property has been a long standing item on our dream list right up there with getting the greatest job or finding that one true love. Home buyers will find that a house of your very own translates not only to a degree of financial security in the future, but is also a good investment choice with lower risk than many other options on the market – provided that you invest wisely.
However when it comes down to purchasing you investment property, regardless of whether you are a first time buyer or making a recurring purchase, most home buyers are faced with a long-standing dilemma between apartments and houses: which of the two is best for investment towards generating a bigger return in the future? While houses are traditionally favored by property investors, it is important to resist the notion of simply going with the market, and to consider your individual situation against a variety of factors that will affect the investment.
That being said, free-standing houses do have some significant benefits. Acquisition of a house includes the land it is built on, which generally results in a higher purchase cost than an apartment but enables much easier addition of capital value onto the property through renovations and extensions of the greater area, as well as possible redevelopments or subdivision of the land. Especially in premium suburbs, the heightened land-to-asset ratio becomes a major driver of the price. Houses also tend to appeal to a broader market for rental or reselling, and allow for higher rent to be charged for tenants. However, they do come with associated downsides as well: houses require much more ongoing maintenance compared to apartments, and generally require holding on to the property for a longer period to reap better returns.
On the other hand, apartments have the benefit of being more affordable compared to houses and are a good starting point for the first time investor, but generally do not experience as large of a capital growth as that of free-standing houses. However, choosing the right geographical location is essential in investing in an apartment where market demand is high – favoring inner precincts with high population density, on-going activity from shopping districts and universities. Apartments also require less in maintenance costs, but this in turn is substituted by body corporate fees and council rates which may impact on future sales or rentals nevertheless. The views and quality of the apartment building can also be make-or-break factors for future value, and thorough research should be undertake to prevent these from compromising the value of the apartment in the future.
In the end, acquiring the right investment property is hugely dependent on the personal circumstances of the investor. With all factors considered, it often pays to seek advice from friends or experts that are well-versed in the real estate market for your situation, in order to make the best decision in maximizing your property investment.
Lovegrove Realty offer industry advice as well as expert Property Management Manukau.