Is it better to buy a highrise unit, townhouse or freestanding house as an investment property? Which will give you the better return?
Ryan: I’m going to jump into the first question. Someone’s asked, “What do you think is better to buy–a high-rise unit, a townhouse, or a house?”
Ben: I don’t really have personal opinions on anything. I just want to start with that. What I do do is, I just look at and analyze data non-stop. As an investor who has a dollar to spend, I want the investment to go into something that’s going to give me the highest return on investment for the lowest possible risk.
If you look at the last 30-odd years of property price data for the Sidney, Melbourne, and Brisbane, which are the three areas which I like to look at, houses have consistently outperformed units. Then if you look at the last five years in terms of this craziness that’s occurred after the JFC, where some areas have grown up to as much as 100 or 200%, other areas have grown by 30 to 50% or 80%, houses have definitely been outperforming units.
I suppose that’s probably due to the scarcity factor around land, particularly in Sidney and Melbourne, close to the sea but in on the bay edges.
If it was me putting my money into the marketplace, I only buy houses or sorts with higher and better use than it currently stands of today. As a buyer’s agency, the last 400-odd properties we bought have all been houses. I think that says more than anything else about what we’re targeting at the moment.
Ryan: The thing I really like about houses is just the level of control you have over units. Now, obviously, units can be great investments. High rises, townhouses, these can all be great investments. It really just depends on your strategy.
I just love that with houses, there’s no body corporate fees that you can’t really control. People spend money in ways that you might not want to spend money, whereas with a house, you have full control over that, which I think as an investor you’re investing to get control of your finances and over your life, so that’s why I also lean towards houses.
I’m not anti units or townhouses or anything like that. They all have their merits, but, you know me, I’m like a solo bird. I like to be in charge of my own life and don’t want to partner up with people I don’t know, which is kind of what happens with lots of units and body corporates and stuff like that.
Ben: I think there’s a time and a place for, like you said … I’m not writing off that marketplace and I would definitely buy units in Sidney again in the next major recession.
If I am going to buy units, what I’ve learned from buying something in a high-rise apartment before where the body corporate did go from two grand a year to $10,000 per year in two years of buying it because people wanted nicer towels around the pool and awesome stuff like that, but adds massive value … with to like target smaller blocks of units and quality townhouses in, you know, maximum five-packs of townhouses with good back yards that are more like detached housing, I suppose, as opposed to your standard townhouse, which is jamming everything into the smallest site possible.
So there’s a time and a place, but houses consistently outperform units. That’s why I’m targeting that product at the moment.
Ryan: Hey, guys, I hope that you enjoyed the answer to this question, which came from our live Q&A episode with Ben on YouTube. We will be doing more of these in the future. If you want to check out Ben, then he is offering free strategy sessions to onproperty listeners. To find out more about that, go to onproperty.com.au/session and you can see all the details over there.
That’s it for today, and until next time, stay positive.