There are lots of benefits to buying a smaller property such as an apartment or a unit. Houses often have a higher entry price point due to land value, so you could potentially buy an apartment or unit with a smaller deposit. Ongoing costs for apartments and units can be a lot less too – council rates are usually higher on a house and in many states, you’re also required to pay land tax on an ongoing basis. With a unit or apartment, costs are limited to strata and body corporate fees.
Maintenance is also a cost that must be taken into consideration. If you purchase a house, all maintenance issues are your responsibility, whereas with an apartment or unit, many of these costs are covered by the body corporate.
These factors mean that a unit or apartment may be more favourable from a cash flow perspective – which is great, particularly for first time investors. Additionally, if you do your research carefully, you could potentially locate an apartment or unit in a location set to make both great capital gains and solid rental returns.
Some developments offer studio and one-bedroom apartments of less than 50sqm. Many lenders are reluctant to finance these properties, and also some small space properties in high rise, high density developments, so it pays to discuss any property you may be considering with your mortgage broker before you sign a contract or put down your deposit.
So how do you know for sure that a location will be in high demand for small space renters in the long term? Small space apartments and units are often in high demand in locations that are close to the action for singles! These may include the city centre and other busy employment hubs, universities, areas with vibrant nightlife, or excellent public transport facilities that provide fast and easy access to these amenities.
To find out what you need to know about a particular location, start by talking with local real estate agents and property managers. Essentially, you’ll want to find the answers to these questions about your chosen location:
There are useful online resources where you can access market reports on specific areas. As your mortgage broker, we can also provide a comprehensive report on any location you are interested in, chat to us if this would be helpful in your research.
You’ll want to analyse the data you collect to find a location with positive capital growth and solid rental yields to maximise the profit potential of your investment. (If you need help, please ask us as we have a great deal of experience.) Some other good indicators of these include:
There are always reasons for and against investing in any type of investment property. The right investment choice for you will depend on your financial position and investment strategy. If you’re considering investing in property for the first time, a small unit or apartment could be a good way to start, so ask your mortgage broker to help you crunch the numbers to see if they add up.
Remember, a good mortgage broker can be an invaluable resource when investing in property. They’ll help you choose the right loan that will not only serve your needs now, but set you up for further investments in the future. Talk to Fornaro today – we’d love to help you get started with a little property investment.
*General advice only