What property type provides the best return?

On 27 December 2016 in Adam Hayes, Jody Hayes, Buying, Achievements, Darwin, Infrastructure, Market, New Years, Results, Statistics, Tips, Investment, Property, Unit, House

Next week we’ll all be taking down our 2016 calendars and replacing them with fresh 2017 ones.

Most people will enter into 2017 with New Year’s resolutions. Some will try to commit to getting fit or eating healthier, others are determined to find a new job or go traveling.

There will also be a number of people looking at investing in property.

For these people - there is a lot to consider when looking at investing in property. When it comes to thinking about the type of property think about what type of property best suits your strategy to deliver long-term growth.

Of course they are both very different in factors such as where they’re generally located, types of tenants they attract and in some cases potential capital growth.

Budget also plays a part in this - as many first time property investors find more opportunities within the apartment/unit sector than the stand-alone house market.

So what’s better for long-term growth and how can you determine which type of property will work best for you? Let’s look at the differences.

Inner city living drives the apartment/unit attraction

  • A key lure of apartments/units are their structural quality and ongoing management and maintenance. Typically they are a solid block construction and engineered to hold up to a higher level of foot traffic and wear and tear by residents.
  • Their body corporate levies also include a sinking fund, which is accumulated and used for repairs and maintenance on the building and grounds.
  • Apartment/unit complexes usually have a property manager to oversee the general day-to-day presentation and running of the building.
  • The downside to this is the more amenities an apartment complex has, such as pools, gyms or lifts, the higher the strata fees, so you need to make sure you include these into your budget.
  • Location is also another factor driving apartment/unit popularity. The inner city market is where a majority of new stock is being built as developers understand the demand for young professionals and empty nesters wanting to be near a city’s CBD for work or lifestyle reasons.
  • But it’s not just the inner city where apartments are popular, as many outer urban areas with good infrastructure and public transport options are proving to be popular with renters.

Homes are where the heart is

  • Detached homes will always provide an emotional factor when it comes to buying an investment property, as it’s the most popular type of residence for families and the type of dwelling where most Australian’s grew up in.
  • Emotion aside, with a house you can generally decide when to spend money on repairs rather than being locked in to paying strata levies.
  • You’re also open to a wider range of tenant types such as those with pets or kids, and in some cases you can charge more in rent for these requirements.
  • However houses generally require more attention in terms of ongoing maintenance than apartments/units do, but if you approach running your investment property portfolio like a business, then you would keep your own ‘sinking fund’ to be able to afford any repairs and maintenance when they arise.
  • Another option which is becoming more prevalent and popular are detached townhouses within managed communities.
  • These provide the all the advantages people prefer in a detached home, but with the benefits of communal amenities and an on-site caretaker to oversee its upkeep, and in some cases there are no body corporate fees.
  • Because of the prohibitive cost of land near the inner city, these types of developments are typically found in the outer urban areas where infrastructure such as schools, shopping hubs and medical services are all readily accessible.

Stats from the most recent RELM report indicate the following -

Buying an investment property in overall Darwin

Median price for a house: $550,000

Median price for Unit/Townhouse: $460,000

Median overall weekly rental in overall Darwin

Three bedroom house: $511.50

Two bedroom Unit: $386.50

Median Rental Yields in overall Darwin

Three bed house: 4.8%

Two bed unit: 4.4%

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