When buying residential property for investment purposes, you have some leeway in the units you can choose. However, you should look for those that will give the best returns on investment. So what kind of property should you purchase? Should you buy houses or apartments?

Look at the Initial Cost

Apartment or units have the advantage of affordability while houses are generally costlier for a first time investor so raising capital may be more difficult. Because of the land value, a house investment has a higher entry price point. The initial cost also varies from city to city. In Sydney for example, the median apartment price can be higher than the median house price in other cities such as Brisbane, Adelaide or Canberra.

Factor in the Ongoing Expenses

Owning a house means that you will grapple with higher council rates compared to apartment ownership. You have to pay the land rates for the life of your investment. These financial responsibilities also apply in apartment or unit ownership in which case you will have to pay ongoing strata fees and other levies.

Cost of Maintenance

Factor in the cost of maintenance when deciding whether to buy a house or a unit. For houses, the maintenances will be your full responsibility or you may choose to delegate this to a corporate manager. For investment units or apartments, the responsibility for maintaining the unit and its surrounds generally lies with the body corporate.

The Rentability

Whether you are buying a house or an apartment, you will want to earn a residual rental income from it over the long term unless you want to flip it. You can optimise your residential property investment by buying a house or an apartment in locations that have a high rental demand. This will not only guarantee you high rental yields but it will also give you a good stream of renters so the property will always be occupied. Some of the best places to buy apartments include locations close to universities, lifestyle areas, transport centres, cafes and beaches among others.

What is Your Investment Objective?

Your investment objective can also dictate the kind of property to purchase. Will you want to flip the property quickly or do you want to rent it over the long term. If you are looking for good capital growth, a house would be ideal thanks to the value of the land it sits on.

A unit or an apartment on the other hand, will give you better rental yields. If you are looking for a property investment with a cashflow objective, you are better off investing in units. The units also have a lower price point so you will be able to build a large portfolio relatively quickly.  

For good value for money, look for the older units that are in smaller blocks as opposed to some cool apartments that are located in a skyscraper. With older apartments or units, you are unlikely to grapple with additional costs such as levies, cost of luxury amenities like heated swimming pools and state-of-the-art gym among others. It is generally easier to find tenants in older properties because there are people already living there. Tenants are unlikely to move into a vacant block of apartments.

These are some of the key factors that you should look into when deciding on what type of the property. Ultimately, the right decision will be depend on your risk profile, finances as well as your investment strategy.