16 Aug Apartments vs Houses – Which Makes for a Better Investment?
“Always buy land. Apartments don’t have land.”
“Apartments are the future; they are designed with mobile families in mind.”
“You have more options in an apartment.”
“People want a backyard.”
In property investment, few topics raise as many passionate opinions as apartments versus houses. On either side of the argument are those who believe passionately that the other side is completely wrong and will end up paying the financial price in the long-term. The thing is, both sides have been proven wrong time and time again, with both apartments and houses – in the right areas – continuing to rise in value. So how do you decide between apartments and houses?
Firstly, it’s important to take all the financial realities into consideration. You cannot compare an apartment to a house based simply on the ticket price and available amenities. You see, while an apartment may have a pool, gym and other facilities, these are paid for through the body corporate which owners contribute to every year. Is there a cleaner on-site? An on-site manager? A gardener? These are all things that must be paid for, and no owner gets an exception. You should also ask about any other costs, such as a sinking fund which will help in refurbishments and improvements around the property when required.
Secondly, you need to know what you are obligated to do, and what the body corporate will take care of. After all, you are contributing a certain amount of money every year and can expect to see some improvements around the property. Usually, you don’t have direct ownership of the exterior of your property, often including the balcony, so ask how often you can expect it to be cleaned, what repairs will be made if required, and if things like pest eradication are included.
Once you have all these numbers together, you can start to make financial decisions. It is a fallacy that apartments get worse with age, but improvements to maintain their legitimacy are often expensive. However, houses require improvements also, and the burden cannot be shared with other apartment owners. Of course, if you own an apartment you will not be able to make the final decision as to what any physical improvements will look like, nor will you be able to hire a subcontractor you have worked with before.
It soon becomes obvious that choosing between an apartment and a house is less about a direct comparison than it is about what is right for you. Overseas investors love apartments because someone else takes responsibility for the maintenance of the property, and there are plenty of other owners around to make sure that the complex remains up to specifications. If you are local, you may prefer to purchase a house, so that you can and direct responsibility for the repairs, improvements and enhancements to increase the value, and increase your equity. Just remember, get all the numbers before you decide whether a certain property is a great deal, as you may discover that it’s anything but.