My Property Investment Tip #11

My Property Investment Tip #11
Apartments or Houses?
Now this is a popular debate!
Apartments are more affordable price wise and are often in more established areas, so they should do well capital growth wise. …. well in theory!
But apartments suck for cashflow because you have to contribute to body corporate fees to maintain the communal property (lifts, pools, driveways, gyms etc). Often apartments break Golden Rule #2 – Make sure the property pays for itself!
The other pain with apartments is that you can do very little with them. Internal renos only. No extensions. No external makeovers (without the agreement and financial commitment of the other owners).
I think of apartments not as real homes, but rather “concrete boxes in the sky”. Because… well… that’s what they are.
Theoretically they should not go up much at all because land goes up in value, and structures go down, and apartments have tiny land components and are almost entirely a structure. But in reality that doesn’t happen and they do go up in value too. Probably because they will always be the cheaper alternative for those who can’t afford a house in the area. So the house prices will drag the apartments along with them.
In practice we know that apartments don’t perform as well capital growth wise as houses in the same suburb do. So houses win for capital growth.
And in practice we know that houses in the same suburb deliver a better net cashflow return because they have no body corporate middle man to pay.
So houses win!
But there is one exception… when you can buy the ENTIRE apartment block at once. Then you are the body corporate and there is no middle man. Then you’re getting the BEST possible return from a piece of land.
So. Stick to houses until you’re rich enough to buy the whole apartment building. Simples.
I’d love to hear your thoughts and experiences with apartments below ?
– Daimo

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Daimien Patterson is the CEO of Integrity Property Investment, a property investment company based in Australia. He regularly produces books, blogs and videos on the topic of property investing, helping thousands of people create financial security and freedom through education and property investment. Get started today.  

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