IP: City apartment vs Suburban House

[mysterious_guy]

Hi all

I am sure this question must have been asked millions of times but i couldn't really find a thread answering all my questions so apologies for asking the same old question but i have never bought an investment property and have very basic knowledge about "Negative gearing", Net return etc.

My question is that if i have two options:

a- 2 bedroom apartment in Melbourne city for $350 k (Let's say Melbourne city or St Kilda with decent location)
Now benefits of apartments according to my research are:
Almost guaranteed rental income (usually high and sometimes even higher than loan repayments)
Less maintenance

Negatives:
Price won't increase as much as a house (in most cases)
No chance of adding value (except minor renovations)


b- 4 Bedroom house and land package in a place like Melton, Wyndham Vale, Werribee etc for $350 k

Positives:
Chance to add value in most cases
Increased value of land over the years
Negatives:
Maintenance
Less rent and not always guaranteed rental income

What are the annual fees of apartments as compared to a house. I mean Council rates, Body Corporate fees , water rates etc in comparison to rates for a house in outer suburbs.

What other factors do we need to consider before making a decision. I do understand that location of apartment/house is obviously very important but let see the apartment is in the heart of the city with all facilities and house is in new suburb with limited facilities (expected to improve in coming years).

I do apologize again if people think my question didn't make sense but i would highly appreciate input from the experts here as i have found that people are quite knowledgeable here.

Thanks people!!

 

[The Y-man]

a- 2 bedroom apartment in Melbourne city for $350 k (Let's say Melbourne city or St Kilda with decent location)
Now benefits of apartments according to my research are:
Almost guaranteed rental income (usually high and sometimes even higher than loan repayments)

I don't think this is true.... maybe my view is clouded at the moment because my 2BR in Parkville has been $%#@ empty for close to 2 months

But always look ate the NET income - i.e. rent minus OC (new name for BC in Victoria) "fees" etc

Less maintenance

I don't think this is true either....it is true that the maintenance costs are LESS VISIBLE - because they are embedded into the OC "fees".

Negatives:
Price won't increase as much as a house (in most cases)

My apartments and houses in Melb seems to grow at roughly the same pace.... probably more down to the specifics of the property.

No chance of adding value (except minor renovations)

A kitchen, bathroom, addition of laundry, flooring/carpet/tiling, light fittings, drapery/blinds, painting can add a fair bit! (can also act as a big sinkhole for you capital too)

b- 4 Bedroom house and land package in a place like Melton, Wyndham Vale, Werribee etc for $350 k

Positives:
Chance to add value in most cases

Disagree for a H&L new house - I mean it's new - what are you going to do?

Mostly in the garden - but will it be a cost rather than "value add"?

Increased value of land over the years

Negatives:
Maintenance

Disagree for a H&L new house - I mean it's new - you'd hope not much needs maintaining... except for all the initial repairs (under warranty hopefully!)

Less rent and not always guaranteed rental income

Some of the most consistent occupancy and general rent growth has been in our units in the "burbs".

What are the annual fees of apartments as compared to a house. I mean Council rates, Body Corporate fees , water rates etc in comparison to rates for a house in outer suburbs.

Rates depend on the value of the place - so can be very similar.

OC/BC "fees" - really these are maintenance and insurance costs - can be (as a ball park) from $1,500 pa ("vanilla" 2BR apartment that was built in the 70's) to as high as $4,000 pa (if there is a pool, gym, lifts and sauna)

Best thing to do is go look at a few places and ask for the section 32 - all the rates, OC costs etc are in there.

What other factors do we need to consider before making a decision. I do understand that location of apartment/house is obviously very important but let see the apartment is in the heart of the city with all facilities and house is in new suburb with limited facilities (expected to improve in coming years).

Whether the banks will lend you money for it - you may not get as much loan for some smaller CBD apartments (even though they may be "2BR") as a house.

The Y-man

 

[cadence]

Hi there

Just want to share my story re house vs apartment.

In late 2007, I decided to buy a 3br brick veneer house with a decent size block in the suburbs in Sydney rather than a 2br apartment in Sydney CBD. The house costed about 5% more than the apartment ...

In early 2010, my house was revalued at 25% more than purchase price, but that apartment in the CBD had increased by 40%. So even taking into account the significant strata I would have paid, the apartment would have worked out as a better investment.

 

[Luv2Travel]

I've said it before, but I don't see any reason for the debate of house vs. apartment if they are in different locations. To take it to the extreme, would you rather a house on an acre in the middle of nowhere 200km from any major city, or an apartment in a sought after city? According to the theory "it's the land that increases", then the acre property would be the better investment.

To me the only time it'd be relevant to compare, would be if say, you had $1M to invest, and the question became 'do I buy 2 apartments in Suburb A or 1 house in Suburb A'. As far as comparing a house in Suburb A vs. an apartment in Suburb B, then it's pointless in my opinion. In fact over the last 18 months I think my city apartment has seen better growth than my IP 40km from the CBD which is a 3 bedroom house on 650sqm land.

 

[mysterious_guy]

I don't think this is true.... maybe my view is clouded at the moment because my 2BR in Parkville has been $%#@ empty for close to 2 months

But always look ate the NET income - i.e. rent minus OC (new name for BC in Victoria) "fees" etc




I don't think this is true either....it is true that the maintenance costs are LESS VISIBLE - because they are embedded into the OC "fees".




My apartments and houses in Melb seems to grow at roughly the same pace.... probably more down to the specifics of the property.




A kitchen, bathroom, addition of laundry, flooring/carpet/tiling, light fittings, drapery/blinds, painting can add a fair bit! (can also act as a big sinkhole for you capital too)





Disagree for a H&L new house - I mean it's new - what are you going to do?

Mostly in the garden - but will it be a cost rather than "value add"?




Disagree for a H&L new house - I mean it's new - you'd hope not much needs maintaining... except for all the initial repairs (under warranty hopefully!)





Some of the most consistent occupancy and general rent growth has been in our units in the "burbs".





Rates depend on the value of the place - so can be very similar.

OC/BC "fees" - really these are maintenance and insurance costs - can be (as a ball park) from $1,500 pa ("vanilla" 2BR apartment that was built in the 70's) to as high as $4,000 pa (if there is a pool, gym, lifts and sauna)

Best thing to do is go look at a few places and ask for the section 32 - all the rates, OC costs etc are in there.






Whether the banks will lend you money for it - you may not get as much loan for some smaller CBD apartments (even though they may be "2BR") as a house.

The Y-man

Thanks for your input "The Y-man", it does provide a lot of information i was after so thanks for your feedback (even all the disagreements lol ).

Jigglypuff, your story is a good one and there is something to learn.

Biggles, i don't have million doallrs unfortunately. I know where you are coming from but your example of buying a property 200km outside city isn't really a good one. There is a difference between buying a property on acres 200km outside and buying a property 35 kms outside with planned train station, schools and other facilities

 

[Luv2Travel]

I know where you are coming from but your example of buying a property 200km outside city isn't really a good one.

I was using an extreme example to prove the point that the size of the land doesn't necessarily mean anything (unless you plan to develop it of course) which is what always seems to be the supporting argument for house over apartment (and as Jigglypuff and myself have both experienced it isn't necessarily the case).

As you pointed out, you need to look at the infrastructure and demand surrounding each property, which may result in the apartment being the better investment despite "no land". So I don't agree with your comment "Price won't increase as much as a house". It just depends which apartment and which house you are comparing and where each of them are.

 

[mysterious_guy]

I was using an extreme example to prove the point that the size of the land doesn't necessarily mean anything (unless you plan to develop it of course) which is what always seems to be the supporting argument for house over apartment (and as Jigglypuff and myself have both experienced it isn't necessarily the case).

As you pointed out, you need to look at the infrastructure and demand surrounding each property, which may result in the apartment being the better investment despite "no land". So I don't agree with your comment "Price won't increase as much as a house". It just depends which apartment and which house you are comparing and where each of them are.

Fair enough, thanks for that Biggles.
Does anyone know where we can find a list of under construction aprtment buildings???

 

[bene313]

Inner-city apartment (2 bed) vs house in Melton (4 bed). Could there be a happy medium?

What about a 2 or 3 bed unit/villa in a small block of 4 - 8 units? This type of dwelling may give you the best of both worlds.