ARE you better off buying a cheaper, older unit or one that’s more expensive but new? We ask the property professor.
Property lecturer and author Peter Koulizos answers your real estate questions.
Q. Should I buy a house with land or an apartment now?
A. Generally speaking, it depends on whether you’re a capital gains investor or an income investor.
House on land has higher growth prospects, generally, and apartments have higher rental yields.
But whether you invest in a house on land or an apartment, you can get it very right or very wrong.
A very old house on land adds no value to the block and a very new house on a small block in a far away suburb would have about the same growth prospects as an inner-city apartment.
If you’re looking to combine the two high growth and high yield look for an older-style apartment in a well-located, near-city suburb, in a small complex.
You also want to look in a suburb where that kind of property is rare and very much in demand by tenants.
The questions you need to ask yourself are: Is this a good location?; Is this in a good position?; Is this the best location in the complex?
Ideally, you want an apartment that has scarcity value either a ground-floor apartment with a courtyard or an upper-level apartment with excellent views.
These places will be more sought-after and have a higher value than others in the same block.
With a house on land you want to look for properties with a minimum rental yield of 4 per cent and a minimum of two-thirds of the total value tied up in the land. But you’re better off with three-quarters of the total value tied up in land. You want the driver of growth to be the land, but don’t want to give up rental yield to get that.
You should also look for anything in a special position a quiet cul-de-sac or opposite a park or a train station.
A unique aspect will make a great deal of difference over a 10-year period. You will always get a premium in a boom and always have a buyer in a trough.
Ultimately, it doesn’t matter which kind of property you buy so long as you buy the right property. That said, there has been a growing demand for apartments lately. T
To capitalise on that trend you would need to look for a property that meets the needs of an ageing population so it should be desirable for people looking to downsize or look for a place which will be desirable for young people in an area which is developing to attract young people.
If an apartment has these features all rolled into one, it will always outperform the market.
Peter Koulizos – www.thepropertyprofessor.com.au