Houses vs. units

Ready to invest but not quite sure if you should be buying a house or a unit? We talk you through the pros and cons of each.

Home for sale

So you’re ready to invest in a residential property? Congratulations! Now what? Well, a whole lot of research and decisions… One of the first choices you’ll have to make — before you select which suburb, which bank and which property manager — is deciding whether you’re interested in purchasing a house or a unit. Now of course this might change at a later date, depending on many different factors including the state of the market, your finances and your investment strategy, but it’s a matter worth considering in the early stages of your investment career to help you narrow down the search field. It’s a given that you’ll be spending the next several months (maybe longer) scouring the real estate advertisements, chatting to agents and viewing properties, but knowing what you’re looking for will help you to avoid wasting time.

There are conflicting schools of thought on whether houses or units make better investments (and plenty more investors with an opinion to share) but of course ultimately, the decision comes down to your personal circumstances. Read on to learn more about some of the key advantages and disadvantages of each.

Investing in houses

The pros

  • One of the key arguments in favour of investing in houses comes down to one much-quoted phrase: “the value is in the land.” Many argue that while land appreciates in value, buildings depreciate. This can be particularly true in densely populated areas where land becomes a rarer, and more valuable commodity.
  • Investing in houses can also offer greater opportunity to develop, by way of subdivision or dual occupancy.
  • House owners also generally have more freedom when it comes to renovating their property as they have no body corporate to answer to; they simply have to get their structural reno plans approved by council.

The cons

  • While of course property prices vary widely depending on a number of factors, it can be said that generally houses are sold at higher price points when compared to units of the same standard in the same location, which may mean some investors will be priced out of the housing market.
  • Investors who want to buy in inner-city suburbs will find that the unit market is generally larger than the housing market. This will mean that you’ll have fewer choices should you choose to invest in an inner-city house.
  • As the landlord of a house, you’ll be solely responsible for the dwelling’s upkeep and won’t be able to rely on a body corporate or owners’ corporation to take care of certain aspects (e.g. landscaping), as you would in the case of a unit.

Investing in units

The pros

  • First-time investors or those on a tight budget may find it easier to track down an affordable unit (e.g. a studio), in comparison to a larger house.
  • Buying a unit may mean that you also get access to facilities like a gym, underground carpark, pool or rooftop area.
  • You may be able to rely on the body corporate to take care of the building’s common areas, exterior, landscaping, etc. for you.

The cons

  • While the benefits that come with a body corporate are great, you’ll also have to pay for them — and fees can be very expensive.
  • Unit owners are also often limited in terms of renovations and complex structural changes will usually require approval.
  • Some investors argue that investing in high-density unit blocks is a risk as it reduces the scarcity factor of your investment.

More investing advice

Factors to consider before signing your home loan contract
Super charge your superannuation balance
5 Tips for investing in property

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