The science of property investment selection
Property investment is not something you should ever enter into without first taking the time to carefully ascertain your personal situation, your investment goals and of course, the type of property that will match those first two factors.
Once you know your strategy and where you stand, the question then becomes – what type of property will fulfil my specific requirements. So what are the most common types of property you can consider investing in, and what are the pros and cons you’ll need to work through?
Detached houses are literally just that – houses that stand on their own on an allotment of land. The size and style of a detached house can vary significantly, depending on when it was built and where it is.
Obviously, detached houses will generally be on smaller allotments in inner city locations where land is scarce, as opposed to the outer suburbs where there is often an abundance of land.
The suburban ideal of a large family home with a big back yard and the Hills Hoist was popular in our culture until recently. However, with a decrease in the size of average households (due to an increase in the incidence of childless couples and single parent households), along with our busier, time-poor lifestyles, many are now opting to live in smaller accommodation that requires less maintenance.
Townhouses are built in groups of two or more on an allotment and are generally strata titled (meaning there are multiple owners of the one subdivision, with shared ownership of common grounds, such as driveways, etc).
The term itself originated in England, where people would have their country estates for weekend use and a townhouse in the city to occupy during the working week.
Townhouses are usually detached, but they may occasionally share a wall and can be either single or, more commonly here in Australia, double storey.
Increasingly, many people are choosing to live in townhouses because they usually have small, low-maintenance gardens or courtyards and more efficient use of internal space.
Units are similar to townhouses, but are almost always single storey. They can be slightly smaller than townhouses, with their more compact size lending to a larger number being built on the one allotment. Units often share common property, with abutting walls or garages.
Apartments are generally found in multi-storey constructions and are all in the one building. They are mostly located in inner city areas where a lack of developable land requires dwellings to be built upwards, rather than outwards, to save valuable space.
Once seen as a cheaper, less desirable form of housing, apartments have become trendy in Australia as more and more people opt to live closer to employment, entertainment and transport hubs.
Traditionally popular in the UK and US, this type of high-density development is becoming more common in our inner city areas as state governments implement policies to contain urban sprawl and house our rapidly growing population.
A duplex is essentially two homes on the one block. The two properties contained in a duplex development are often joined by a common wall or garage and have traditionally been popular with extended families, where for instance elderly parents might live in one property and their adult children might live next door.
It is obvious when driving through any Australian neighbourhood that properties come in many different shapes, sizes and styles. When selecting your investment strategy, it is important to have some understanding of the different architectural types of properties available and what makes some more popular with both owner-occupiers and tenants.
Because supply and demand largely drives property values, clearly those properties that have some degree of scarcity value will perform better than those that are a dime a dozen and can easily be replicated.
For instance, period homes such as those from the Victorian and Edwardian eras are no longer being built, yet they have an enduring appeal. Many are in prime inner suburban areas and it is for these reasons that they tend to hold their value considerably well.
Similarly, Californian Bungalow and Retro style buildings are often in greater demand from homebuyers and manage to attract comparably better price growth than generic style housing.
Architectural style is immensely important when considering an apartment investment. Many investors have been caught out by inner-city apartment booms in Melbourne and Sydney, where they bought bland, generic apartments off the plan and then could not tenant or sell them.
The fact is, most apartment dwellers like the building they are in to have some character. Period and retro features in apartments command top shelf prices and are always in high demand.
Interestingly, a lot of people are now looking to art deco and ’70s style apartments in inner city areas as well. Many of the apartments built around this time were more spacious and brighter and as property investors buy them to refurbish with modern fittings and fixtures, they are finding renewed favour among young tenants.
Eighties, ’90s and mass-produced noughties suburban houses are among those that are generally not in great demand. Often in outer suburban estates these homes are replicated en masse and, after some time, tend to look tired. Often developers responsible for such housing are in it to make a quick buck and aim to turn around stock as quickly as possible.
The point is, to get your investment strategy right and ensure you acquire the best property investment portfolio to suit your goals, it’s important to know what attracts both home buyers and tenants to different properties. Appealing architecture that will stand the test of time is always going to serve you better than something lacking any distinct characteristics or features.
For more information on how you can select the best possible property investment and finance structure for your needs, click here to contact us, or subscribe to receive regular post updates and industry insights.
Stuart Wemyss is a chartered accountant and founder of Property Tycoon Finance. Email: firstname.lastname@example.org
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