Whether you’re looking to purchase an investment property or a new residential home, finding the right type of property can be challenging. There are a range of different factors to consider, and each property for sale will have its pros and cons. To help you decide which option is best for you, we’ve done a brief overview of what to expect when considering your next property purchase.
Rural living is the ultimate dream for some, however, many overlook the fact that maintenance can become an issue. If you have tenants, will they be willing to consistently put in the required effort for the upkeep of the property? Mowing lawns and maintaining the grounds on a large property is a much bigger job than in a suburban area, and it can quickly lose its appeal. It’s also important to note that the return on investment (ROI) can be considerably low once maintenance costs (which are often carried by the landlord) are included. If the ratio of income to property value is too far skewed, this could be one investment strategy you’re better off avoiding.
Because vacant land is often a fraction of the cost of a completed home, it can be tempting to consider it as an investment. However, the issue with this is that land does not provide an income, and as such, all associated costs cannot be claimed as a tax deduction. Buying land can be an excellent investment strategy for people with very high incomes or equity positions, but for the average person, it’s best to stick to bricks and mortar.
A unit or apartment is a popular investment choice as they generally have lower council rates and are often within close proximity to central hubs, facilities and transport. The downside is that most of these multi-home complexes are governed by a body corporate and owner’s committee, which supervise the rules, repairs and maintenance of the grounds. This can sometimes be problematic as you have less control over your investment and dealing with other property owners can be a less than pleasant experience if there’s a matter you disagree on. If you decide to go down this path, the best advice is to invest in complexes with 6 or less units, and avoid complexes with lifts and swimming pools, as these can add to your maintenance costs and body corporate fees, ultimately reducing your ROI.
Houses are an excellent investment choice for a number of reasons. Firstly, a property for sale that is between $350,000 – $500,000 are most recommended based on the best ROI. The key is finding a property that is situated close to central areas with diverse employment opportunities, and ample facilities and infrastructure. Properties outside of these limits will not provide the same income, however the sale prices will also generally be a little lower. Ideally, homes with 3 – 4 bedrooms, 2 bathrooms and with parking or garage space make the best investment properties, and a fully fenced yard on a flat block are other desirable features. Unless you plan on doing significant renovations, it’s best to purchase properties with a construction date post 1990, and before buying, always consider the potential maintenance costs of the first five years of ownership.
Townhouses and Duplex
Two for the price of one, anybody? Well, not quite, but duplexes do typically provide better rental returns than houses and are also entitled to the same tax benefits. The most attractive factor about duplexes is that you can essentially have two rental properties built on one block of land, sometimes with their own titles. This means that you only own 50 percent of the land, therefore prices for a duplex are often around two thirds of the price of a house in the same area. While some duplexes are separated by a common wall, the most desirable ones are two independent homes built on the one title. To maximise market appeal, look for townhouses with a 3 bed, 2 bath and double garage configuration, and of course, in an optimal location.
The decision of which property to buy really comes down to what outcomes you’re looking for. Based on the evidence, the best residential investment properties are houses or duplexes, as they seem to offer the best ROI, land ownership, most potential for capital growth, and lower maintenance costs.