I usually find Australian real estate investors have a certain type of investment property in mind. That could be a house, apartment, duplex or townhouse. There are pros and cons to each investment type, however the game is changing for the apartment market.
The Australian property market is enormous, however there is a growing trend throughout the country, where there are tens of thousands of new apartments being constructed. This will cause the market to become oversupplied and will drive vacancy rates up and reduce rental yields. This saturation point is already being experienced in some states.
Developers are getting nervous and this can be seen by the incentives they are starting to offer buyers. Some incentives include; rental guarantees, paid stamp duty or even a free car, this shows something is seriously wrong. Developers don’t just give away thousands of dollars for nothing. The cost of these incentives is just added to the sale price. This is quite clever marketing on the developer’s behalf!
Identifying the right investment property can be time consuming and is also complex. Where and what you buy will affect your return on your investment property, so you need to get things right.
Avoid buying investment properties with a Strata/Body Corporate, the fees and sinking fund payments reduce your rental return and affect your cash flow. The owner’s Corporation can raise an unexpected special levy for an essential expense, whereby all owners must pay the levy and this could be several thousands of dollars, which you haven’t budgeted for.
Another disadvantage to owing an apartment is that it won’t be unique. If there are a few hundred identical apartments in the exact same complex, all competing for the same tenants or buyers it will work against you. The increased competition will restrict resale potential and rental demand.
I often get asked to share my property investing strategy. My approach is straight forward. I purchase free-standing houses in established areas, where cash-flow is the key to successfully growing a property investment portfolio.
Historically, over a longer time frame, houses perform better than apartments. Remember, land appreciates and buildings depreciate. The other benefit of owning a house is that you have full control over the property to add value.
We make investing in real estate easy and hassle-free, each stage of the investment process is managed on your behalf to achieve the best result for you! Send me an email and we’ll set up a time to chat.
“Simon, we would like to take the opportunity to thank you for your professionalism, advice and personal touch in purchasing our first investment property. It’s been an absolute pleasure. You have made an overwhelming process so hassle free and seamless. We look forward to working with you again!”
Mark Cole & Kim Middleton – Sylvania, Sydney