Should you buy a house or an apartment? Some people believe buying a house is a better investment because the real value is in the land. Land increases in more value than buildings over the long-term.
Other people prefer investing in apartments because they offer an affordable entry into competitive property markets.
Regardless, houses and apartments are both good investments. Investors have had great successes in both sectors. BUT, if you had to make ONE decision, I believe it comes down to two key factors: your property investment goal and your budget.
Buy a house or an apartment: What is your property investment goal?
Do you prefer to make money from buying and selling properties? If so, consider buying a house.
Selling a house is more profitable than an apartment because of the land. You can always build houses but you cannot create more land. The problem is, it will take a long time, even decades, for a house to double in value. To make money quicker, buy older houses for a cheaper price, renovate, and then sell. Repeat this cycle.
However, if your investment goal is to make more rental income, considering buying an apartment.
Houses do command higher rent but apartments can give you higher rental yields, especially in competitive property markets.
Apartments are cheaper to buy and the monthly mortgage repayments, taxes and utility costs are generally cheaper than compared to a house. This means, as a landlord, you keep more of your rental income.
What’s your property investment budget?
If budget is not an issue for you, buy a house. As the freeholder, you can sub-divide the land and sell it as separate plots. Or, extend the property, or convert it into multiple units that can also be sold separately. A big advantage is that you do not have to get consent from another landlord.
But, if you are on a limited budget, buying an apartment in a central location is a good option. Buying an apartment should not be labeled as the ‘second best option’. Apartments are more affordable so you can grow your property portfolio sooner, while making a steady rental income.
Many people mistakenly claim that land is always the better investment. But you should question: where is the land located?
Apartments and studios in capital cities can be worth much more, and attract higher rent, than houses in suburbia or the countryside.
The biggest mistake people make
The biggest mistake people make is wasting time.
People who are adamant that owning a house is better than an apartment can spend years saving for a deposit. Unfortunately, they get out-priced from the property market when they are ready to buy because they’ve waited for too long.
Enter the property market as soon as you have the deposit and enough savings to manage your cashflow. You can read more tips on how to become a better property investor here.
So, is it better to buy a house or an apartment?
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