Jun 17, 2021
Welcome to the Australian Property Podcast - Hosted by Jonathan Preston.
In this episode, we discuss townhouses vs houses vs units - my experiences to date.
We will be back with new content for the next episode next week, so be sure to check back soon.
hi guys my name is Jonathan Preston and I want to talk to you today about investing in houses versus units in the Australian property market now the first important factor I would like to discuss with you guys is the concept of land value so if we look historically over the last 20-30 years over the capital gains and everything that have occurred in Australian property over that time land Bayou has really been the largest determining factor in that obviously the area is very important as well but the land value is really what goes up over time you know properties can be replaced things get old everything like that but the land value that remains so if you want to sort of go for the lightest capital gain which is you know typically what you probably should be looking for as an investor looking for that you know oversized land value relative to the price that you're paying it's going to be a very important part of your decision now when we compare that to apartments we can sort of look at say Studios versus one bedroom has two bedrooms first three bedrooms now three bedrooms are becoming sort of less popular with developers it seems to be a lot more so Studios one bed one bed and study and two bedrooms that are being done these days and if we even sort of look back typically you'll see a lot of two bedrooms around personally in terms of apartments I like two bedroom apartments much more than I like a one-bedroom or a studio you might better get a decent upfront yield from a studio or one-bedroom but the potential to make money you know over the long term a two-bedroom is likely to give you a much better capital gain so I would definitely be looking at 2-bedroom apartments even if you have to go a bit further from you know centers compared to like a one-bedroom or a studio over the long term you will do much better by being in a two-bedroom so at least that's that's what I foresee going forward so in terms of apartments that's what I'll be looking for if at all possible then you know to get the land that I do on a house would be ideal but my door listen in to consider yields now having land gives you a number of other benefits so for example there is the opportunity to put a granny flat on it obviously your property is going to need to be the right size and get you know council approval and everything like that before you be able to actually do that but it is potentially an option you know those laws may change and everything in the future as well there's also the opportunity for subdivisions depending on where you are and the size of your land too and so there's just some of the examples of the kind of flexibility you get by having land now the other thing we could look at is sort of town houses and villas which are kind of in between houses and apartments one big advantage of that is that you're getting a lot more land than an apartment and I would see a much better entry point than houses typically in terms of they're generally a lot cheaper but what you will need to consider is that there's often you know stride or body corporate costs associated with townhouses or villas and that's you know similar to apartments in that way now what does that cover so typically that will cover building insurance and that will cover some of the maintenance of the common areas there may be money put aside for like a sinking fund so that the booms can be fixed in time if required so you know a lot of the money is not wasted however there is going to be a strata company that will typically be running there for the group of owners and others they're not gonna work for free so they're taking profit directly out of your back pocket whereas if you own a house you'll have to obviously pay the insurance but you won't have someone you know that you're paying to maintain common areas and this kind of thing and sort of run meetings for the owners and stuff so that's something that is pretty different in between their different property types now I personally would favor houses however yields are a big consideration and with houses you know you'll often find it quite difficult to get yields so it depends where you look and in some you know parts of of the country you will be able to get good yields on houses and especially if you can find something that has the opportunity for a granny flat or includes granny flat already then you can be quite good in that situation could be ideal but a lot of the time on you know in areas you'll be looking at houses will just be sort of out of reach for most investors and you might find that 2-bedroom apartments give you a much better entry point into the market so with that you know I wouldn't say that two bedrooms or anything should be shied away from they can definitely be a good starting point with that being said if you can get villas or townhouses and get a really good yield on them then that's probably you know going to be the right sort of step up from form an apartment but you need to you know price everything up you need to see what your yields going to be and and just see the difference between buying a house with decent yield and the yields they need to get by comparison in a villa or townhouse or an apartment so these are some of the things you need to consider now in terms of strata and body corporate you'd be looking at probably 350 to 750 a quarter for most properties you know that that don't have a huge amount of facilities getting you know 750 a quarter and above you'd want the property to be quite high value or to be getting a lot of facilities for that when it becomes above that figure I generally think gonna be probably too expensive and maybe not worth it at all so you need to really look into that if you're looking at a place that has a gym and a pool and you know a lot of shared facilities the the strata or body corporate is going to jump in price you'll need the yield to be really high to overcome that it's cost so you know look at those very closely and pretty much everything I've bought I've gotten with a strata management cost of item to 500 a quarter and ideally you'd want to get that you'll need to obviously price by comparison building insurance costs that's factored into the strata normally so you know if it's going to cost you nearly that amount you know then you'll need to work out you know I you still getting a good deal on straddle or you know is it you know rather uncompetitive and so that's gonna be an important consideration but you'll need to look at that and see how expensive it is add that to mortgage costs add that to all your other ongoing cost and then work out you know are you actually positively geared are you negatively cared how a negatively geared are you so you'll need to sort of make all those calculations in terms of the final decision well most important for most people it's going to be growing in portfolio obviously you don't want to buy you know rubbish properties just because they're high yield but at the same time you know by building a portfolio is the primary goal for most investors so in that case you know you will be looking at something that has higher yield so it's really going to depend on you know what opportunities are available for you you need to do your homework you need to meet a lot of agency lot of properties and then just sort of work out what so your difference you're looking at if it's various a very small difference like maybe you're looking at 7% from an apartment and maybe a 6.8 in on a house well in that case you know the house is probably going to be a much better deal but if you're looking at higher 1% you different say 7% for an apartment verse 6 for a house you know it's becoming a bit more shaky then you need to consider ok if I get the building insurance on the house you know how far off Strider is that and so how much is the strata pulling the yield down but then you know you've got a back that the land value is going to make the property probably grow faster over time if you look at their graphs and look at houses version yields the long term performance palaces have typically outperformed by quite a lot so I generally lean toward buying larger properties in areas that are yet to gentrify as opposed to sort of buying a flashy apartments now I will talk further about buying properties off the plan in in a future video so please check back for that if you've got any questions please you know leave any comments or get in touch with me and I look forward to seeing you guys again soon please like share and subscribe and thanks for watching