I have finally managed to save a small deposit for my first investment property but its only enough for a unit. I understand the value of a house can go up by approx 4% per year, which sounds great to me because then I could build my portfolio. I am wondering about the value of a unit? Does it increase, decrease or stay stagnant? With 4 children and no house of my own, it's been hard going saving the $7,000 that I have, I would really like to get into the market now rather than wait another 5 years.
Unit or house?
- Thread starter kristy77
- Start date
Hi Kristy
There is no definitive answer to the old house vs unit investment question, as it ultimately depends on the risk profile and preference of the individual investor. Whilst some experts might also argue that it's the land content value that matters most (therefore making housing the superior choice) land by itself doesn't determine growth. It's the level of demand for it that does. After all, a block of six units on a block worth $2m in a high-demand area might produce better growth than a house with land worth $300K in an inferior location.
Both types of dwellings can produce results but there are many variables to consider for the investor: affordability, location, security, level of autonomy over the asset, maintenance, rental return and financing.
Depending on your preferred location and budget, there are a lot of variables. Do you know where and how much? This will help.
There is no definitive answer to the old house vs unit investment question, as it ultimately depends on the risk profile and preference of the individual investor. Whilst some experts might also argue that it's the land content value that matters most (therefore making housing the superior choice) land by itself doesn't determine growth. It's the level of demand for it that does. After all, a block of six units on a block worth $2m in a high-demand area might produce better growth than a house with land worth $300K in an inferior location.
Both types of dwellings can produce results but there are many variables to consider for the investor: affordability, location, security, level of autonomy over the asset, maintenance, rental return and financing.
Depending on your preferred location and budget, there are a lot of variables. Do you know where and how much? This will help.
It depends what you're after. If you want to start with better yield, then a unit may be the better way to go. Also, buy the right unit can mean just as good capital growth as a house.
I like units, because they are cashflow positive sooner, and thus you can build your portfolio more quickly. Buy in the right area and the capital growth comes too.
I like units, because they are cashflow positive sooner, and thus you can build your portfolio more quickly. Buy in the right area and the capital growth comes too.
You are being specific with property you have purchased.
Just because its a unit doesnt mean that its cashflow positive any sooner then a house.
You can purchase house and land with varying yields.
Jacq nailed it on the head, its not about buying a house or unit. As each may grow at a different rate depending on the area.
Your best option is to buy a property that you can afford that you think is going to perform best in that area, sounds simple... No point buying a unit in an area that there is no demand for unit etc...
Have you got a pre-approval? Its pretty dificult getting a loan approved for your first property if its an investment property, and that is your only asset.
Many lenders ristrict the lvr for such a situation, meaning you have to put in more than 5%. Also, while they will use the likely rental income, they allow for the rent you are currently paying, which cancels out in most cases.
Many lenders ristrict the lvr for such a situation, meaning you have to put in more than 5%. Also, while they will use the likely rental income, they allow for the rent you are currently paying, which cancels out in most cases.
How much is your purchase budget and can you in any way take advantage of the FHOG (I know you are talking about investment could you live in and still be able to service the loan? If you are looking at units - there are some things to investigate such as the strata, etc. The benefit with purchasing a house is that there is more scope to get capital gains, i.e. development, renovate, extend, build, etc. Not saying that units are bad but really think about your long term IP strategy.
True, but comparing property in the same or similar location the unit will generally yield better than the house.
Although you can indeed purchase house and land with varying yields, I tend to focus on inner city or inner suburban areas. For these areas, units almost always have better yield.
You will likely struggle to get finance for this.
Also I dont think you would have too much capital growth.
Property could only be sold to an investor who wants to rent out to a retiree (this is why you would struggle with finance)
Don't get me wrong they can be good for cash flow... but besides that....
Similar threads
