All Topics / Help Needed! / Houses versus Units

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  • Profile photo of sandy.vgsandy.vg
    Participant
    @sandy.vg
    Join Date: 2008
    Post Count: 19

    HI

    New investor getting all sorts of opinions on lots of considerations. But can you give me your views on my topic? Is it better to invest in units, or houses (of course locations, rental returns etc are all to be considered) but your views appreciated.

    Also Ive been told is better to buy new than not, the biggest reason being depreciation a higher rate on new properties?

    Thanks

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674

    Sandy
    Hope this view may give you some idea of what to consider.

    Houses cost more to buy than a unit.

    Units.

    • If you were trying to get your foot into the property market a unit  might be the only thing you can afford.
    • Body Corporate to deal with . This may restrict what you can do as far as renovation and also body corp fees and common area repairs to pay.
    • Less Land on property. Land goes up in value not the building.
    • This may be the preferred option for aging baby boomers with empty nests to move into in the future.
    • You need to consider the tenant market of the area is it a family area or a young professional area with no kids or elderly people who may rent a unit. Are units in demand to be rented or is it houses in the suburb.

    Houses

    • Suit families ( this depends on the tenant market of the area is it a family area or a young professional area with no kids)
    • Larger land size – room for capital gain or later sub division potential
    • More rent than unit
    • No body corporate

    Do a search in google for {suburb you are buying in} demographic
    To find out who lives there and what the likely rental property is
    or ask some local real estate rental property managers what they rent out more. (do not ask real estate agent seller as they may have a vested interest in making the sale)

    buying a new property or a recently built property. The depreciation is usually 2.5% of the building cost  per year .
    see
    http://www.ato.gov.au/content/downloads/IND00133187n17290608.pdf  page 20
    before 1979 the depreciation is zero

     What you have to be aware of is that the depreciation claimed for the building will reduce the cost base by the amount claimed.
    in English this increases you capital gain so you pay more capital gains tax if you sell in the future.

    Profile photo of ErikHErikH
    Member
    @erikh
    Join Date: 2007
    Post Count: 118

    Sandy,
    If you're into property with a longer term buy and hold perspective no need to consider demographics and what that will do to the types of properties in demand. In my view, going forward well positioned units close to employment centers and with facilities (nearby) will do very well in the future. Much better than the average house+land in the average suburb which is miles away from the CBD or employment centers. It is supply-demand that drives prices and the question unit or house is too simplistic and so is the much heard comment that buildings only depreciate and only land appreciates…

    Profile photo of Jon ChownJon Chown
    Member
    @jon-chown
    Join Date: 2007
    Post Count: 254

    ErikH says
    It is supply-demand that drives prices and the question unit or house is too simplistic and so is the much heard comment that buildings only depreciate and only land appreciates.

    Thank goodness that some can come to grips with this statement.   The person who coined the phrase 'Land appreciates and Buildings depreciate' must have had a personal dislike for Units.   The comment just doesn't make sense in general terms.

    Show me a house built in 1980 for $30,000 that has depreciated to nothing.   Those $35,000 houses that I used to sell back then must be real cheap by now.

    Profile photo of sandy.vgsandy.vg
    Participant
    @sandy.vg
    Join Date: 2008
    Post Count: 19

    Thanks all for your posts. All very interesting and worthwhile reasons to study more about. Great food for thought for me. MOre questions another day when digest a bit more info and study a bit more, meantime watching everyone elses posts/questions/answers.
    Cheers!

    Profile photo of Event HorizonEvent Horizon
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    @event-horizon
    Join Date: 2008
    Post Count: 90

    i think Jon might be to simplistic and have an agenda….but agree with erics view on location…however if you can buy high demand  location and a quality free standing house (with all the usual ticks marked off on the list) then you will be far better of than a non discript, developer designed , medium density eye sore ( in Jons area of sales the Gabba central would be a good example of rubbish inner city architecture with little chance of growth in the short to medium term) but in a good location where house price growth  will far out strip such developments.

    Profile photo of sandy.vgsandy.vg
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    @sandy.vg
    Join Date: 2008
    Post Count: 19

    Thanks. Just have to figure out which definition of 'high demand  location"  is the right calculation for a 'yes' on that regard. There are many factors to consider I know, and most of all wish someone would tell me where to buy the RIGHT crystal ball! lol

    Cheers!

    Profile photo of Jon ChownJon Chown
    Member
    @jon-chown
    Join Date: 2007
    Post Count: 254

    Event Horizon, I have no agenda and have never said that units are better than houses in all cases, however as this is an information forum, I do believe that the statements given should be factual so that people reading are given the opportunity to make an accurate and informed decision on creating wealth through property investing. Many first time investors here have limited starting capital or borrowing power and hence buying the house and land in my opinion may not be in their best interest.  The statement that buying land with an investment (while there is some merit in it, it needs to be clarified) is better than units is just a crock.  Depending upon the style of investment that the investor wishes to become involved in – buy and hold, renovate and sell, buy and add value etc the main theme should be to maximise the return on the investors dollar outlay.  On a buy and hold plan Inner City units will out perform Inner City houses almost without exception. (Leaving riverfront out of the equation). That’s is not because I have an agenda to sell units, it is just a fact that I have discovered while researching growth in houses and units in various Suburbs around inner Brisbane.

    Profile photo of ducksterduckster
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    @duckster
    Join Date: 2004
    Post Count: 1,674

    It really comes down to what is in demand in the area at the end of the day.

    Profile photo of sandy.vgsandy.vg
    Participant
    @sandy.vg
    Join Date: 2008
    Post Count: 19

    Thanks again. Your statement Jon, whatever one looks at, of…
    maximise the return on the investors dollar outlay
    should be what I should look at when buying the right ball in the crystall ball shop, as well as cash flow required in the interim. All else is consideration, but keeping the plan and strategy in mind uppermost.

    Cheers

    Profile photo of Jon ChownJon Chown
    Member
    @jon-chown
    Join Date: 2007
    Post Count: 254

    Sandy,

    Obviously my statement  'maximise the return on the investors dollar outlay' doesn't make sense if you are not aware that there are computer programs available that can assist you to ascertain almost the exact return on your investment input.   No crystall ball required, just some common sense and the ability to be conservative.

    Somersofts PIA is just one example.  Smart Investors won't leave home without it.

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