Flat or House

[HowDo]

Hi everyone and thanks for a great forum.
I am a newbie. I am trying to decide between a flat in Elwood or a house in Mulgrave. They are both about the same price. I think the flat would have better rental potential but the house may have better CG because of the greater land content. I don't see any other issues. Can you please help me get some more perspective. Thanks.

[Corsa]

Originally posted by HowDo
Hi everyone and thanks for a great forum.
I am a newbie. I am trying to decide between a flat in Elwood or a house in Mulgrave. They are both about the same price. I think the flat would have better rental potential but the house may have better CG because of the greater land content. I don't see any other issues. Can you please help me get some more perspective. Thanks.

Hi HowDo

I have both Houses and Flats (in Adelaide though) and both have experienced strong capital growth and the Flats have experienced higher rental yield. The best performer has been a 1 bedroom Flat in a group of 40 that is mid way between beach and the city experiencing both the highest yield 13%+ and 57% CG in just over 1 year. I consider the "Flat" to be a cash-cow that is much more money is generated from having the investment than not having it. I consider a couple of the "Houses" to be development potential that is I can demolish and redevelop down the track.

Think about how each of these properties measures up in terms of Yield (Rental Income/Purchase Price) and likely Return on Investment (CG + Rental Income) over say a 5 year timeframe and then assess how they measure up.

If your strategy is to build up a property portfolio then you may wish to consider buying in the area that is likely to generate the most CG sooner rather than later.

Consider the historical capital growth for each of these areas and put a % likelihood on future capital growth. Consider the likely tenants that these properties may attract, long term or short term, families or young professional singles. You are correct in your comment about greater land content being better for CG and some investors only invest in houses for this reason, but I would say that at the moment it really depends on what your strategy is and how some of the above mentioned factors sit in the overall equation.

A similar post was posted recently you may wish to look up the responses to that post as well.

Hope this helps.

Kind regards

Corsa

[Aceyducey]

HowDo,

Some questions for you to think about....

Do you have any reason to suspect that one area will do better than the other?

What are the comparative CG rates over the last ten-twenty years in both areas (for the type of dwelling)?
What is happening currently in both areas? Pop aging/rejuvenation/infrastructure changes/etc

Which delivers a better rental return?
Which is likely to increase in rent faster? - try to get rental histories for both areas & look at infrastructure & social changes as per CG.

What condition are the properties in?
Do either of them require more ongoing maintenance?
Don't forget you will have to pay strata fees & more on the unit!

How long do you intend to hold the property?

Can you afford to buy both?

Cheers,

Aceyducey

[PEI]

Hi Howdo

What I would recommend would be to get the current past history of both postcodes for Units and houses that show both last 20 years average capital growth and average rental yields. Then make an educated decisions on each suburb.

[HowDo]

Thanks guys, I really appreciate the help.
Where can I get data on CG for different areas?

[Jamie]

www.residex.com.au

and

www.homepriceguide.com.au for starters...


Australian Property Investor magazine also usually has capital growth stats in each issue.