Freestanding homes usually appreciate more than an apartment. The main reason is simple: land. Size plays its part too.
In fact, valuations quite often separate the dwelling from the piece of dirt it sits on,
And subject to planning or council controls, house owners have quite a lot more freedom and opportunity to renovate or rebuild, as opposed to apartment owners.
Plus, there are no restrictive strata bylaws to abide by either (such as having pets and common property/access rights).
The payback is in the purchase price
The cost of buying a house in a convenient area for a first home buyer can be considerably higher, meaning you risk taking on too big a mortgage. Houses can be maintenance heavy and require large sums of money to fix structural problems.
The most common type of apartment is strata title. This is where you become part of an owners’ corporation, which controls the administration and any funding of common property, all financed by strata fees and levies. Note that the body corporate can impose special levies to carry out maintenance, which can be large.
The other type of apartment is company title. This is where unit owners effectively buy shares in a private company, entitling these shareholders to exclusive possession of a particular unit.
Shareholders vote to decide company rules governing occupation, including rights to lease, sell or transfer shareholdings, which can be quite restrictive.
Company title apartments generally cost a little less than similar strata properties because such rules around ownership and disposal limit the number of potential buyers in the market. This in turn can reduce their resale potential to some degree.
For this reason some mortgage providers are less willing to extend loans on this type of apartment, or may require a lower LVR.
If an investment property is your first home purchase, both houses and apartments present viable arguments.
Families as well as a group of individuals can be potential tenants for either houses or apartments. So depending on the size of your property, the pool of renters in the market is greatly enhanced.
Smaller properties catering mainly to individuals or couples tend to rent well if located close to amenities such as universities, shops and public transport.
Properties near the water always offer good growth prospects because a wide range of buyer-types will be interested. This also goes for properties in family-friendly suburbs with good schools and cheaper suburbs with ‘yet to be discovered’ potential.
It’s your home
Well-meaning friends and family will advise you on what they think is the best option. Yet both houses and apartments can deliver positive returns. What you need to do, ultimately, is consider these things:
This is the fun part! If you’re buying a property to live in, then your needs and desires will dictate what you buy – coupled, of course, with what you can afford. So it’s important to spend some time weighing up what’s really important.
Light and space are crucial features for most home buyers. Take note of the rooms in your current living environment that you enjoy being in and chances are they have a high level of natural light and a spacious feeling. Look out for sunlight and design/lay-out that creates a sense of space.
If buying a home as an investment, are you keen on DIY renovations? If so, then consider whether you’ll be able to carry out the renovations yourself or whether tradespeople will be needed (and to what degree?).
If you’re not DIY inclined, consider how much money you can afford to pay a professional to carry out renovations. You may wish to budget some or all of your renovation costs into the overall amount you borrow to purchase the property.
Are you happy to drive to the nearest shop, or would you prefer to be within walking distance? Is there a bus stop or train station close to the property? What about schools?
Being close to amenities is not something everyone needs, but if you’re the kind of person who likes to be ‘in among it’ then this should probably be a priority.
A standout kitchen or bathroom really makes a difference to a home buyer’s perception of a property.
If you’re planning to lease an existing property, keep in mind that families with young children will probably want things like a bathtub, while young couples and professionals might be more interested in a top-notch kitchen.
Consider the type and amount of parking available. If a home has its own car space, that’s a brilliant value-add, particularly if the suburb grows in popularity.
If it doesn’t have a car space, you might like to visit the property at different times of the day and week, to determine how easy it is to find a car space. Carrying a boot-load of groceries two blocks can become exhausting!
If you’re looking for a home for your current or future family, three bedrooms is generally the preferred minimum. Then when it comes to sell, three-bedroom houses tend to attract a wider market of buyers than properties with fewer bedrooms, because couples and families are both interested in a home with a few rooms.
Another option is to look at a one or two-bedroom home with the possibility of extending – either up or out – over the coming years.
If you’re considering extending a property – say, adding an extra bedroom, you will most likely need to submit a DA (development application) for approval.
Before engaging architects, designers or builders, you should check with the local council first to see if a DA is required or not.
This is particularly important if the house is heritage-listed or your planned extension/s affects the privacy or sunlight of neighbours.
If you already have children (or planning to), you should definitely look into the number and calibre of nearby schools.
And even if you have no intention to have children, keep in mind schools are a major attraction for those who do, should you decide to sell the property at a later stage.
Having a large area in which to relax is a key selling point in a home these days. A lounge room is probably the area in which you’ll spend most time, so make sure you feel comfortable in it and that it’s big enough for all your lifestyle and furniture needs.
Storage space in a home can be essential. If you have lots of clothes, bed linen, bikes or work equipment that needs to be stored, then look for a property with existing (or potential for) built-in wardrobes, cupboards and storage space.
The ‘wow’ factor in real estate terms; views can enhance the experience of living and the value of a house or apartment.
They don’t have to be of the sea or the countryside – views of the city, a neighbourhood park or an attractive classic building can all add value to a property.
Owning your own home is widely regarded as the great Australian dream. Making money from owning your own home is even better.
With some planning and attention to detail, it’s possible to not only enjoy living in your own home but to make a profit too. Ultimately, it all comes down to appreciation.
Real-estate appreciation is the increase in value of your property expressed as a percentage on an annual basis. A useful rule to remember is that if your home increases in value by 10% every year, it will double in value every 7 years.
Appreciation is good because it brings equity (i.e. value in your home), which means that, subject to your ability to service further loans, you could use your equity as security to invest in other projects, if you choose to do so.
Even if you don’t plan to be an active property investor, it’s natural to want the value of your investment to increase over time.
For reports on property sales in all suburbs, visit Property Value (previously RP Data Australia).
When it’s time to sell, it’s vital to make a good first impression. A potential buyer is looking at your house because they’ve already decided they’re interested in the area and price range. Now it’s time to ensure your home presents at its best.
Complete any repairs before any photos are taken or open house inspections arranged. Repairs made before the sale may cost you less than having to discount the purchase price of the property.
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