Houses or units: which is more profitable?

By YIP | 08 May 2014


Should you invest your hard-earned cash in a house on a quarter acre block, or a low-maintenance apartment in the city?

It’s the age-old question that plagues property investors across the nation, and as is often the case when it comes to real estate, there is no clear-cut answer.

“The question itself is not as simple as it sounds, as there are so many factors that determine profitability,” says Elisa Townsend from The Finance Team

“When I look at a property for myself I tend to go for houses, mainly due to the development potential. If I get a decent block in a growth area then there is the possibility of developing the site –even if only to the point of a dual occupancy – and increasing the yield.”

However, this is not necessarily a blanket strategy that applies to all investors, she warns. The long-held argument for houses over units has been largely drawn from the belief that “the value is in the land”, as land appreciates and buildings deprecate, and therefore houses are always the premium option.

But Townsend says there are many factors to weigh up.

“That approach depends on location, the local council development regulations and the potential growth for the area,” she explains.

“You also need the ability to maintain the property and rent it consistently – after all, what is the point in having a house with land if you can’t rent it and therefore cannot hold it?”

When trying to decide between houses or units, she suggests that you evaluate your options based on “the quality factor”. This means investing in the best quality property you can afford within your budget – regardless of whether it’s strata titled or standalone.

“In regards to units, you need to pick quality developments in quality areas with a good agent, as this provides a desirable property to tenants,” she says.

“This translates to maximised rental returns and minimal vacancy rates, which maximises your income.”

Townsend shares her top three tips for a profitable property investment:

  • Structure in routine maintenance. “If you keep your property, whether it’s a house or unit, in good repair, you increase the property’s overall profitability,” she says.
  • Engage an A-list property manager. “If you have an agent who is diligent and takes care of the property, and who doesn’t keep changing the method of rental payment, you will have happy tenants and therefore a lower vacancy rate,” Townsend says.
  • Review rents regularly. “A good agent will help you make sure you are charging the market rent, instead of too much or too little.”

Top Suburbs : millner , darlington , menai , midland , greenwood


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