— Property

What is the Best Investment Choice

To make the right decision for you, it’s essential to understand what you are trying to achieve with your investment and understand the pros and cons of each option.

Investing in Units:

Pros

Units are often more appealing to investors because they are cheaper in their initial price and generate higher rental yields.

The lower initial costs make them easier to purchase and manage repayment costs as a rental income is often higher than the mortgage repayment price.

Generally speaking, many units can achieve 4-5% yields, while houses in comparable locations may be under 2%, which makes units as an investment very attractive.

Another advantage of purchasing a unit is that it provides the opportunity to buy into a highly sought-after area which may have been otherwise unaffordable if an investor was looking at houses only with the same budget.

Many inner-city metropolitan areas close to water or amenities are often priced well over $1 million in almost all states in Australia. Comparably, units in the same site can be under $500,000, which is far more affordable for an investor who might be on average wage with limited serviceability.

Cons

The land is scarce, particularly in capital cities and large metropolitan areas. Houses occupy more physical land, thus their increased cost. As units occupy less space, they are in abundance in comparison to homes. This lack of scarcity can decrease your capital growth over a long period should you wish to purchase a unit.

It is worth noting that not all units are the same. Directly comparing one unit with another could be comparing apples and oranges. One team in a block of three units is vastly different from a unit in a league of 300. Based on scarcity alone, you can see which of the two is a better investment.

While yields on units are generally higher, strata (also known as body corporate) fees must also be factored into calculations as they can significantly impact the overall outcome. In many instances, complexes with great features such as pools and gyms come with sky-high strata costs, making them a similar yield to a house.

This rings true especially for inner-city areas, and as a result, populations rise, and demand is ever-increasing. Over long periods, houses have been proven to outperform units in terms of capital growth, and we expect this trend to continue long into the future.

Mainly since the COVID-19 pandemic, research has found more than ever that people are opting for houses with access to a backyard and fresh air rather than a unit with limited space.

Gemma Broadhurst
Gemma Broadhurst is a 23-year-old computing student who enjoys extreme ironing, hockey and duck herding. She is kind and entertaining, but can also be very standoffish and a bit evil.She is an Australian Christian. She is currently at college. studying computing. She is allergic to milk. She has a severe phobia of chickens

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