Ask anyone who
invests in property – and even those who don’t – and they’ll likely have an
opinion on the “houses versus apartments” debate. When the topic of
conversation drifts towards property investment, it usually generates a heated
debate.
On one hand, you
will find those who firmly believe that buying a house as an investment
property is the superior decision. On the other hand, you’ll find those who
believe that a property’s individual characteristics – such as location and
number of bedrooms – are far more important than the type of property. Before
you pick one over the other, be sure to consider the following pros and cons:
Frequency of Maintenance
Broadly speaking,
as a “set and forget” option that promises appreciation over time, it’s hard to
beat an apartment in a good location. Provided that you’re careful and do
your due diligence in terms of property style and condition, apartments
generally attract a higher yield, are low maintenance, and when issues with the
building do occur, they are generally handled by the property manager in
place.
However, apartments
also come with annual fees, which cover general maintenance to the building and
any improvements. The more amenities boasted by an apartment block — such as
pools, gyms or lifts — the higher the maintenance fees. This is an important
factor detracting from the appeal of apartments as an investment property. With
houses, you can decide when to spend money on repairs rather than being locked
in to paying for maintenance on someone else’s schedule.
Opportunities to Renovate
When you own your
own home, you are able to make additions that are simply not possible in an
apartment building. Depending on the area you live in, you may have to acquire
a building permit for your addition, but theoretically if you have enough land,
you can expand to your heart’s content.
Perhaps you would
like to open the master bedroom and put a walk-in closet? As long as you don’t
take out a support beam, grab the sledge hammer and get to work! There is
virtually no limit to what you can build on your own property as long as you
follow the laws and ordinances of your city. Such changes can be trickier
in an apartment, and may require special permissions.
Size of Investment
In essence, it’s demand
which ultimately drives investment growth, not the property type. Therefore,
when trying to decide whether to buy an apartment or a house, think about what
kind of people live in the target area, as well as their preferred choice of
property type. In some areas, such as those where young couples
live, apartments are the bigger sellers, whereas in others, such as areas
where families with children are settling, it will be houses.
A big part of your
decision will also be made for you depending on your planned budget for this
property investment. When it comes to real estate shopping, apartments tend to
be cheaper than houses. It’s entirely possible to find a nice apartment in a
major city for less than $50,000, and then rent it out remotely to make a profit.
Ultimately, there
are pros and cons attached to any dwelling type, and the right investment for
you will depend on your risk profile, investment strategy and financial
position. Make an educated decision and reap the benefits!
