Property Investing Made Pure
It’s a perennial investor question. And most investors have an opinion on what is a better investment option. So rather than give my own opinion, I thought it would be an interesting exercise in the question of ‘what makes a better investment, units or houses’ to explore my companies personal investment portfolio and how the portfolio has performed over the past 3 years.
When I am faced with the question of ‘what investment option performs better units or houses’? The answer is always presented with the caveat of ‘its depends where and what you are buying’.
Some of the biggest advantages of investing in units are the fact that you can invest for less. Meaning you can potentially enter the market without having to muster up a larger deposit. On average, units typically present a gross yield around 1-2% higher than free standing houses. (Though body corporate fees can eliminate this yield gain if you don‘t invest wisely). Units typically require less maintenance ongoing also, as much of the maintenance is covered by your strata company. The potential draw backs for units however are elements such as unexpected building maintenance (special levies), you only own a small portion of the land in which the unit complex is situated, thus when the land appreciates you are only exposed to a small amount of capital growth.
With regards to houses the advantages are typically the disadvantages of units. You don’t have any body corporate fees, your land is 100% yours and you will access a greater land appreciation than units typically. Though the drawbacks from houses are equally the benefits of units. They typically require far more maintenance from the owner (yard care, external/ internal maintenance), houses typically demand a lesser rental yield than units in the equivalent areas, it requires a much greater deposit to invest in a house over a unit in a similar area, also land tax can be an unexpected pitfall for many investors not factoring this into the investment.
Pure Property Investments portfolio is somewhat balanced between units and houses. We don’t only buy one or the other; rather, we look at the fundamentals of suburb demographics, purchase price, vacancy rates, potential yields, transport and infrastructure. These factors will dictate what were buy and when.
Pure Property Investment (PPI) has investment heavily in the NSW and QLD markets over the past five years. To date our portfolio consists of 45% units and 55% houses. After spending some time crunching the numbers on how our units and houses have performed over the past five years, the results may be surprising to some.
PPI units (NSW and QLD) performance over the past five years = 38% growth (7.6% average annual growth)
PPI house (NSW and QLD) investment performance over the past five years = 31% growth (6.2% average annual growth)
Now obviously the NSW and QLD markets have performed significantly differently over the past five years (but we’re very bullish on our QLD investments over the next five years). Although it does provide a very real insight into what an objective and targeted investment strategy can achieve. As always, the key is the right investment type, at the right price, with the right demand and future prospects.
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Disclaimer - Contents of this site are of general nature only and should not be relied upon solely when making an investment decision. Pure Property Investment nor any of its directors, associates, staff, or associated companies bear any liability from any actions derived from the contents of this website. One should always seek third party investment information from relevant parties such as legal, finance, and accountancy enquiries.