— Property

What is the Best Investment Choice

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To make the right decision for you, it’s essential to understand what you are trying to achieve with your investment and understand the pros and cons of each option.

Investing in Units:

Pros

Units are often more appealing to investors are they are cheaper in their initial price and also generate higher rental yields. The lower initial costs mmakethem easier to purchase and manage repayment costs as rental income is often higher than the mortgage repayment price.

Generally speaking, many units can achieve 4-5% yields, while houses in comparable locations may be under 2%, which makes units as an investment very attractive.

Another advantage of purchasing a unit is that it provides the opportunity to buy into a highly sought after area which may have been otherwise unaffordable if an investor was looking at houses only with the same budget.

Many inner-city metropolitan areas close to water or amenities are often priced well over $1 million in almost all states in Australia. Comparably, units in the same site can be under $500,000, which is far more affordable for an investor who might be on average wage with limited serviceability. The land is scarce, particularly in capital cities and large metropolitan areas.

Houses occupy more physical land, thus their increased cost. As units occupy less space, they are in abundance in comparison to homes. It is this lack of scarcity which can decrease your capital growth over a long period of time should you wish to purchase a unit.

It is worth noting that not all units are the same. Directly comparing one unit with another could be comparing apples and oranges. One team in a block of three units, is vastly different from a team in a league of 300. Based on scarcity alone, you can see which of the two is a better investment.

While yields on units are generally higher, strata (also known as body corporate) fees must also be factored into calculations as they can significantly impact the overall outcome. In many, this lack of scarcity features such as pools and gyms come with sky-high strata costs, making them a similar yield to a house.

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Tristan McCue is a 26-year-old junior programmer who enjoys reading, binge-watching boxed sets, and appearing in the background on TV. He is smart and friendly, but can also be very evil and a bit lazy.He is an Australian Christian. He has a post-graduate degree in computing.
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