Many property investors are often caught up between the choice of buying a house and buying a unit to grow their portfolios, but how does one actually determine which of the two is better than the other for the business of creating wealth?
According to Smart Property Investment’s Phil Tarrant, choosing one over the other or vice versa does not actually make a difference for him as an avid property investor.
“I'm not hung up on units or houses. For me, it just comes down to the quality of the investment. Why I'm investing in there? What sort of yield it's going to provide me? What's the long-term strategy in holding that property?” Phil explained.
Many people are inclined to think that houses are better investments because they are on land, and land is traditionally considered a scarce asset. However, the evolution of the population has had a positive impact on the value of units in the past few years.
“Over the last number of years, there's been a real shift towards the value of units, and that's reflective of an evolving population and the way we choose to live,” he said.
“People are getting married later in life. People are staying single forever. The type of migrants coming in to our capital cities these days are from locations and countries with very high density of living and they're happy to live in units.
“I know some very senior property figures think [that] studios are a great investment because of the need for single people to live in studio apartments and they're happy to pay for that. The investment stock and perception towards studios, over the years, has gained quite a lot. Even lenders have changed their lending criteria against units because they're deemed to be not a negative asset hold but a good investment hold.”
Furthermore, Right Property Group’s Steve Waters believe that more investors who believe in the principle that “cash flow is king” are starting to go for units because of the balance that they can bring to their property portfolio.
“The units, townhouses, villas, usually do give a better yield. Yes, there's some higher cost to operate with them if you buy at the wrong complexes and so on. It's a balancing act… Everything goes up, comparatively speaking,” Steve said.
At the end of the day, it’s all about making the choice that will ultimately lead you towards achieving your specific personal and financial goals.
“The whole decision on whether it's a house or a unit to begin with is more emotionally based on what you've been told from years and years and years and years. I'm not saying you should have one or the other, it's just as you build your portfolio, it needs to be balanced. There's some really good reasons for that — cash flow, land tax, maintenance,” Steve concluded.
Tune in to Steve Waters' episode on The Smart Property Investment Show to know more about his first investment property and his worst investment property, as well the life lessons they taught him and his most valuable "nugget of wisdom."