Top tips for choosing the right real estate investment that suits you

As a real estate investment advisor and buyer’s agent, I have purchased many homes and units for real estate investors. Am I constantly being asked if I should buy a house or a unit? Which real estate investment will have a better return?

So I thought I’d shed some light on the subject.

Units as real estate investment:

Since units generally have higher rental yields than houses, this is attractive to cash-flow positive real estate investors. The key points to consider when buying units, villas, townhouses, apartments and the like as investment property are:

• Higher capital growth can usually be achieved in smaller unit blocks (less than 10-20 units in a block). This is mainly due to scarcity and also due to lower maintenance costs.
• Higher capital growth can usually be achieved on blocks that are majority owner-occupied rather than investor-owned. This is mainly due to lower turnover and better property maintenance.
• The higher the land allocation to a particular unit on a block, the higher the value it will have and, in general, the higher the capital growth it will achieve in the future. Ground floor units and apartments with patios and gardens will have higher capital growth than others without it in the same block of units.
• The closer to services, transport, employment and entertainment, the higher the overall capital growth (try to stay within 10 km of the capital’s CBDs, but not within 500 meters or within the 500 meters, since it is usually too close to the city and too populated with investment stocks that have more turnover and less scarcity)
• The only problem is choosing the high capital growth units to buy and generating rental yield with smart renovations.

Houses as real estate investment:

Since houses typically have a higher GL than units historically, as a real estate investor, you should try to choose the high capital growth houses to buy, but be sure to choose wisely so you can create higher rental yields and tax deductions. (if for investment) with smart renovations, as this will increase rental yields, which is one of the disadvantages of houses versus units as investment property.

The key points to consider when buying unit land homes, villas, townhouses, apartments and the like as investment property are:

• Homes traditionally get a higher CG due to higher land contributions, and the closer to town, water, services, transportation, employment, and entertainment, you have the greatest chance for higher capital growth (ie. i.e. land-scarce areas)
• Houses are more flexible for renovation or real estate development compared to units, therefore the value added and capital appreciation factors are much higher.
• More lifestyle space: gardens, larger rooms, etc.