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Apartment vs Townhouse vs House, as an Investment Property

Buying an investment property – whether it’s your first or your fiftieth – is a big deal. It’s not just some out-on-a-whim decision you make to instantly get rich. The term investment means you’re in it for the long haul. Once you've made the decision to become a property investor, one of the first questions you'll probably ask is, what type of property should I invest in? An apartment? A townhouse? A house? While the answer may largely rely on the current rental market, your own personal finances, lifestyle, and property goals, we’re here to explain the pros and cons of each so you may get a clearer idea on what is the better investment for you and - hopefully! - you get to answer your own question.

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Questions to get started

If you’re clueless on where to start, you can begin with determining your non-negotiables. The space, location, and size of property are just some of the few factors you can think about. We listed out some examples of questions you can ask yourself to guide you in your decision-making process.

• Are you willing to shoulder ongoing costs and maintenance?
• Would you consider renovating?
• What is your budget?
• Do you have plans to rent out the property?
• Will possible renters find the type of property appealing?

Once you have an idea of what your non-negotiables are or once you’ve sorted the major factors to consider, you’re now ready to look at your options!

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Buying an Apartment

An Apartment is a self-contained flat that is part of a bigger complex. Owning a unit means you are on a strata title. A strata title dictates that the unit belongs to you but several different owners share the common property. It also means you belong to a body corporate and you as a flat owner must comply with certain bylaws. You need to pay body corporate fees to cover the repair and maintenance of the common areas. The amount you pay will depend on the size of the lot you own, its age, its size, and its amenities.

One of the major benefits of owning an apartment is a cheaper purchase price and more convenient location which is ideal if you're single, or for property investors and first home owners.

Pros:

• Apartments have lower purchase price than stand-alone houses.
• Apartments are easier to maintain due to body corporate who handles the repairs and maintains the common areas.
• Apartments have a good level of security. With emerging security advancements, there are now swipe cards and CCTV that adds security for occupiers.
• Apartments have added amenities. Unit owners can enjoy amenities such as gyms, pools, lifts, and tennis courts.
• Apartments have lower utility bills. Living in a unit will cost you less when it comes to water, electricity, heating, and gas.

Cons:

• Apartments are usually smaller and involve less space.
• Apartments have expensive body corporate fees to compensate for the amenities.
• Apartments is less flexible. The bylaws dictates whether you can have pets within your unit, and dictates whether or not you can renovate the place.
• Apartments have limited parking space. Since you live with others, there is more competition for parking spaces and it will definitely be more expensive.

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Buying a Townhouse

A townhouse is a multi-level building designed to mimic a traditional house that is owned on a strata title which means you own the space but you share the land with other people. It’s a good alternative for families who want to own a house that are within their budget as townhouses offer the space and privacy of a house with an outside courtyard. However, townhouses also have body corporate that entails the same restrictions as that of apartments.

Pros:

• Townhouses are more spacious than apartments.
• Townhouses offer the same privacy as a house and don’t have shared areas.
• Townhouses have less restrictive bylaws compared to apartments.
• Townhouses are cheaper than houses. And Townhouses that are closer to the cities or beaches is still more affordable compared to buying a house.

Cons:

• Townhouses are less spacious than houses
• Townhouses are more expensive than apartments
• Townhouses are on a strata scheme and shared title
• Townhouses have same layout and design as your neighbours’
• Townhouses have two to three storeys making it not suitable for elderly or disabled owners
• Townhouses have less capital growth than a house.

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Buying a House

A house is a traditional stand-alone property wherein you purchase the land on an individual title. Houses are one of the most popular property types as it allows the most flexibility and privacy for owner-occupiers. Let’s look into the pros and cons.

Pros:

• Houses are definitely more spacious. If space is an important consideration for you, a house may be your best bet. Houses have minimum block size set by the government and it tends to be larger than a unit or townhouse.
• Houses include outdoor space. If you want a home that comes with a front or back garden, houses will most likely have them.
• Houses offer more privacy. Compared to town houses and apartments, you’re not sharing common areas with multiple people.
• Houses gives you the freedom and flexibility to renovate. Since you have a single title, you are free to do what you like with your house as long as it follows council regulations.
• Houses offers better financing options. Lenders will likely lend you more money when purchasing a house as they prefer freeholds.
• Houses offers better resale value. In general, houses appreciate better and offer higher resale value.

Cons:

• Houses are more expensive than other types of property especially in premium locations.
• Houses are harder to maintain. Due to the larger space and amenities such as garages and gardens, there’s certainly more space to clean, maintain, and repair.
• Houses entail higher utility bills. Houses generally have larger bills as they are more spacious hence, will take more energy to heat and cool.

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What is the best property investment?

Now that you’ve brushed upon some of the pros and cons of each type of property, you’ll know that the right choice or property investment is context specific. When it comes to maximising return on investment, there are two components to consider: rental yield and capital growth. Rental yield refers to the income received from the property and capital growth refers to the increase in value of property over time. Houses, when selected properly, have better growth patterns whereas apartments have better yields. When it comes to rental return, apartments are slightly better. If you’re looking to maximise rental income while minimising expenses, an apartment or a townhouse might be more ideal for you. But if you’re leaning towards capital gains, houses show much strong capital growth than apartments or townhouses. Some individuals may even consider rentvesting in order for them to purchase their dream home. Again, it all comes down to what your investment goals are.

Making Your Decision

To come up with the best decision when it comes to choosing the right type of property investment, you need to determine what your investment goals are and consider your current financial situation. It’s important to do your research, plan ahead and get advice from property experts who can guide you through your options.

As property investors and property managers, we want to help you get the most out of your investments. A9 Property provides first-time homebuyers and property investors knowledge on the world of real estate. Our weekly real estate blog discusses a variety of property-related topics, including property investment strategies, real estate industry trends, and current property market shifts to give you valuable insights and help you make informed decisions. We specialise in off the plan properties – a popular investment strategy in Brisbane and Australia. If you're looking to invest, Check out our carefully selected portfolio of off-market properties for sale or contact us for an obligation-free chat to discuss how you can succeed in the business and make the right property investments.