Hi, I'm new here and I have just been browsing some of the topics and came across a Houses v Units question that in my opinion was not well answered. I did not want to create an argument by stepping on other members toes so I thought it best to offer this link so that interested parties can make up thier own mind on a statistical point of view.
This article was written after a lot of research and by using actual sales figures. The mis advice on Houses being cheaper to maintain than Units just because Units have a Body Corporate is simply rubbish in most instances.
I hope this helps some of the members who are trying to use leveraging as a way to make money.
I've owned units and houses that have done well. I think a generalisation will be very inaccurate as it depends where the property is, what size, condition, rental or resale demand etc. One thing is for sure though; the cheaper priced units will always be easier to resell and rent as there are far more renters and buyers at the lower end of the scale. This doesn't necessarily mean they will do better as an investment; it just means they are a more "liquid" investment than houses as a general rule. Select each one on it's merits.
It must be remembered that the statement applied to Units V Houses within 6k of the GPO. I agree that some houses will fair as good or even better than units outside this area. The other consideration was that the properties purchased were median priced properties and I would welcome anyone to show me a median priced house that out performed a unit for the same outlay.
Again correct in the rental/sale comment. and of course you are so right in saying ' to each his own' . I was simply attempting to point out the subtle differences of leveraging.
As to pushing my own barrow – I'll leave that alone here. I am not interested in attempting to sell on this site.
I personally believe units are the way of the future…more singles out there means more units will be required and thus demand will push up their prices…houses will remain lower priced as the "nuclear" family dissolves slowly…so in essence, units are a much better long term investment…
PS…units are cheaper to maintain then houses, based on: 1. "Usually" children are not bought up in units and hence less get broken. 2. No/little gardening (somehow the owner always ends up doing some gardening). 3. Body corporate makes sure that there are no external pipe issues etc. 4. There is "less building" to maintain. 5. Unlikely that pets will be allowed in a unit, although its not a good idea in any IP.
look around any inner suburb of any city, units need to be build on land, houses control more land as units creep into the suburbs delvelopers, pay a premium for houses to bulldoze, If your looking for capitol gain you need to invest in some thing that will be come more scarce as the years go by a unit in a 50 story building probally won't be as scarce as a house on a decent block,
I think houses and units in low level walkups in sort after areas will out perform when it comes to longterm automatic profits, due to the fact that these properties control more land.
People need to take an emotionally intelligent stance when it comes to these sort of topics. If you jump in and pre judge one as being better than the other you are simply displaying a lack of disciline and emotional intelligence. There are too many un measurable or unquantifiable variables at play here to judge one or the other as being better. It would seem from the experience of many people that both can be very good investments.
On face value land apreciates and buildings depreciate, so many people are quick to belittle the value of units as good properties for capital gains. However look at any property reports and data and consistently over the long term well built and located units are capable of equal growth to many houses, terraces or vacant land.
The key to me for the argument of units verse houses is the aims of the investor, not so much the relative returns, as both can offer good returns. For those wanting more passive investment clearly units offer a significant advantage as the body corporate maintains the building and grounds. For those wanting to value add or redevlope, clearly houses are more flexible and generally offer better opportunities. But we need to be carful generalising as i know many people who have generate terrific profits from remodelling units or dual keying units or consolidating units.
The key to effective unit investment or for that matter any property is to go for scarity. Just simply buying the ordinary run of the mill unit in an ordinary loaction with no particular view or outlook is a cause for concern. Any two bob developer can produce endless quantities of new units that offer the same only newer so this will limit capital growth to below the mean. But going for units in unique locations, with unique views, ammenities or localities should offer similar growth to many suburban homes and teraces. Sure many units have little land content, however, the value per m2 of well located units is often considerably higher than that of any other land in its vicinity. Additionally the development application costs and construction costs of units has gone up exponentially in recent times. This will cause new developments to be considerably more expensive which will in turn increase the value of existing units.
Another benefit to owning multiple unit properties in the one state is that you can own many units before you become liable for land tax. Sometimes up to 7 or 8 very scarce units before land tax kicks in.
A lot of the peole that instantly jump on the anti-unit bandwagon would do well to open there eyes and consider some of the information out there before eliminating units as very viable investment vehicles.
I personally have a diversified approach, in apartments, houses, land and shares. I regard investing like transporting the royal family. Dont put them all in the same car or convoy in case of accident or ambush. But make sure they are all in high quality vehicles that will perform as required.
An interesting topic and one that I am often asked.
The first point to answering the question must be: what do you want from your investing, as it is the response there that should dictate the way you invest (property / shares / businesses) and also the method used (relative to $ and time).
Of course, there are pros and cons to investing in units. The advantages would be:
1. Generally more affordable due to less land content 2. Can be easier to rent, yet tenants can tend to be more transitory 3. Sometimes less maintenance as there is less to maintain 4. Yields are generally slightly higher
On the flip side though,
1. You often have to deal with body corporates where there is common property. This leads to a loss of control. 2. Unit price growth tends to underperform house price growth (in $ terms) over the long term
In my own opinion, I am reluctant to invest in units mainly due to the loss of control in having to deal with a body corporate. If I buy units then I try to buy the entire site, strata subdivide and sell them individually.
That's not to say you can't make healthy profits investing in units. You can. It's just not my niche.
1. You often have to deal with body corporates where there is common property. This leads to a loss of control.
On this issue, I believe that people should be aware that the 'Unit Owners' are the body corporate and the Body Corporate Manager works for them if they are not doing as you ask – sack them. I believe (from my observations) that the greater problem is the fact that most Unit Investors become apathetic after purchase and leave all of the property management decisions to anyone else but themselves. If people do not take an active role in manageing their property then they should not expect others to do so on their behalf. I have considered offering a service to my clients to attend the Body Corporate meetings on their behalf in order to maintain the property value.
and 2. Unit price growth tends to underperform house price growth (in $ terms) over the long term
Yes it does, but by a lot less than most people believe and in the area that i have mentioned there is no 10d allowance on houses as they are usually over 50 years old, this reduces borrowing capacity.
But as you rightly point out – everyone has their own belief and likes and dislikes – this post was not about convincing anyone to go out and buy units but more to debunk the myth of house capital growth rates which are so incorrectly quoted and reported.
I have just purchased a block of 6 by 2 bedroom units to add to my portfolio of 5 houses and two units. It is a great way of balancing the finances. The individual houses are great for capital growth (land value) but have a poor cash flow. The units are great for cash flow but have a lower capital growth (land value).