Which property type makes for the best investment
If you're looking into taking out an investment home loan in the near future, now could be the perfect time to commit. With the recent news from the Reserve Bank of Australia stating that the official cash rate will remain at a significantly lower level for the foreseeable future, it's a good time to begin looking into low mortgage interest rates in your region, in order to support the growth of your property portfolio.
However, one thing to consider when moving into the market is about the type of property you should purchase for your portfolio. After all, there could be dramatic differences between the profits earned from a detached home in the suburbs when compared to an apartment located in the heart of a capital city. Understanding these differences can help you create a great investment portfolio, with a wide range of diversity heading into the future.
Here are some of the details to consider about each property type before making a decision.
Purchasing apartments as investment property has a number of benefits, which could be worth looking into. For one, they tend to be cheaper from the get go than detached homes, which can make them perfect for new investors or those interested in creating a large spread of real estate across a certain area. With the tendency to be found in populated metropolitan regions, apartments often focus on securing a constant rental yield rather than working towards an overarching capital gains growth.
This is when location becomes important. If you can find an apartment in the bustling heart of a capital city, chances are that you'll always have a constant stream of people looking for accommodation, meaning your investment apartment will never be empty - and therefore unprofitable - for too long at any given time. This can be one of the problems with houses, especially if the home is in a suburb that isn't seeing significant population growth.
On the other hand, detached homes can be great for investors interested in long term commitment. Oftentimes, investors purchase these properties for their portfolios in order to renovate them or wait for their value to grow before selling them for a profit in the future. Naturally, this takes time; it can be upwards of 10 years before the real estate sees a significant degree of capital growth.
This leaves you with one of two options. You can either live in the property during this time, making renovations and working towards creating the most profitable slice of real estate possible. Or you can rent the property out to secure rental yields in the interim. The latter is a great option to consider. However, this can make doing renovations, and other operations to increase the real estate's value, difficult.
With the focus on capital gains one of the main draw cards for detached homes, future regional growth is more important to consider than it is with apartments. While inner city areas will always be popular with professionals, suburban regions can fluctuate. Therefore, take the time research potential regions by looking into future developments and projected degrees of growth in these areas in order to make the most informed decision possible.
What type of property is the best?
The short answer is both. Having a diverse property portfolio is the best way to insulate yourself against any potential changes in the market, allowing you to continue making mortgage repayments and earning a profit from your investments even if one market begins to decline. Growing a portfolio is a long term process, but the rewards can be exuberant, so get in touch with a financial expert to discuss the home loan options available to you.
Image credit: Pocketaces