Choosing the right investment property type to suit your portfolio can play an important role in helping you achieve your financial goals. Different types of property offer the opportunity to take advantage of various benefits, but also come with their own drawbacks too.
Here is a quick look at the pros and cons of some of the different investment property types:
There are several benefits to investing in an established house. A house has promising capital growth prospects, as the land beneath the property has the potential to increase in value. Investors have the option of adding value to an established home by completing renovations or updating fixtures, fittings and appliances. An established property can also begin generating rental income immediately after you receive your keys.
Buying an established home as an investment can also have disadvantages. Older properties may require more maintenance and repairs as fixtures and fittings age, which increases your ongoing costs and can become a drain on your cash flow. There may also be fewer tax benefits associated with investing in established properties.
Building a house-and-land package can offer several distinct benefits over buying a home that is already built. You save money on stamp duty costs, as you’re only paying stamp duty on the land value and not on the entire purchase price of the property. As the property is newly-built, there should be very little maintenance for the first few years. New homes can often be more attractive to tenants as compared to an older property, which can translate to reduced vacancy rates. There are also significant tax advantages to building a brand new investment property, so you have the potential to reduce your tax liability.
During the construction stage, your new property is unable to generate any rental income. You’re also responsible for the interest costs on the mortgage throughout construction until the home is complete. Finding suitable vacant land in popular locations can also be challenging, especially in already established suburbs.
Apartments can provide several benefits for investors. In most cities, apartments can achieve higher rental yields than those offered by houses, so they’re often good for generating positive cash flow. Apartments also usually require less maintenance than older houses, as much of the building management and maintenance is taken care of by a strata manager. If you buy an existing apartment, you’re able to generate rental income from settlement day.
Apartments do not have their own individual land value as a house does, so they may have limited opportunity for capital growth. Any increase in property value is reliant on the value of the improvements in the dwelling as a whole. Owning an apartment also means paying strata fees associated with the management of the building and common areas, which can reduce cash flow. There is also the risk that multiple apartments within the same building or complex may be advertised for sale or rent at the same time, creating an over-supply of similar stock.
Choosing the right investment property for you
While there are definite pros and cons to different types of properties, the key to choosing the right one for your investment portfolio is to consider your personal financial goals. Weigh up the options of each type of property and know how it could potentially impact your investment strategy before making a decision.
For advice on which type of property may best suit your individual financial circumstances and goals, call the expert team at Nieuvision on 1300 832 554. Or to book a seat at Nieuvision’s next FREE property investment info session click here.
Investor Sales Consultant
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