Comments on: Units or Houses – Which Make Better Investments?

By: aliceliping@hotmail.com

aliceliping@hotmail.com — Wed, 08 Apr 2020 13:13:24 +0000

Hi Steve,

Great article, but how about the same budget in terms of unit in Caulfield compared to say house in Mulgrave or Springvale? Cause you only talking about house and unit in same suburb, but the key is more about same price for diff suburbs? Would love to hear your thoughts on this one…

Thanks

By: Gary

Gary — Thu, 06 Dec 2018 01:50:47 +0000

Great post Steve. You have cleared the confusion between units and houses. However, how do we find the bext suburb as per the quote “You are better off purchasing the worst house in the best suburb you can afford… “? What are the criteria’s for the best suburb? Lets say i can afford to buy a 700K property in Melbourne. There are 100+ suburbs that fall into that bracket. How do I narrow down my search and identify the bext suburb not only to live but for capital appreciation or rental income?
Any pointers will be greatly appreciated.

By: Steve McKnight

Steve McKnight — Wed, 07 Nov 2018 10:22:00 +0000

Land doesn’t give you an income, unless you are running cattle on it or have some other niche use.

– Steve

By: Les

Les — Wed, 07 Nov 2018 10:16:41 +0000

As everyone knows Land appreciates Buildings depreciate so why not just buy Land (leased of course)

By: AussieKiwi

AussieKiwi — Thu, 06 Sep 2018 00:02:53 +0000

Thats awesome knowledge there!!!

By: Nithya

Nithya — Sat, 21 Oct 2017 12:02:19 +0000

Great !! Keep writing..

Builders in sydney
http://www.reddyhomes.com.au/

By: Juerg

Juerg — Mon, 02 Oct 2017 10:02:41 +0000

Hi all,
I agree with a lot of the comments. If one has to invest into units…we rent one after owning one previously…so i have some experience. I agree with everything Steve said about the older…typically Red Brick Units. They are better built, less noise ( especially the internal double brick ones), less maintenance. One does not pay for Gyms, Swimming Pools etc! I would hate to be an owner in some of these new developments. The build quality is very questionable. There are insufficient builders guarantees as well. Therefore future Strata Fees will sky rocket because of the extensive repairs that will be required. With regards to the Middle Unit issue…do not forget the extreme heat and cold! We have found that the middle unit is usually quieter in terms of traffic noise and certainly stays cooler in Summer and warmer in Winter!
Cheers
Juerg

By: Benny

Benny — Sat, 09 Sep 2017 06:09:18 +0000

Hi Bob,
I’m with you. There certainly does tend to be a tendency for “bad news” from the media to be thrown like mud – “Units are in a bubble – blah, blah, blah” and, although the article might have mentioned that these are typically CBD hi-rise units, the whole lot seem to get a caning from “Joe Public” at a BBQ.

As such, I think your point is an awesome one. As Steve mentioned in the article, older units (think “6-packs” and “8packs”) tend to be larger, with more land content so better growth; and often easier to rent because of their larger size. They are also often in well-settled neighbourhoods, thus helping with the “Location” aspect which also leads to better growth.

And if you can find one that is “needing care” and you can provide that, better yet !! Buy a problem, reno it, and sell a solution (or rent out the solution for now !!)

Benny

By: Bob

Bob — Sat, 09 Sep 2017 00:12:02 +0000

Great article Steve. Has anyone ever considered whether now might actually be a great time to buy well located low density units in Melbourne due to the general negative sentiment around them like this article and many others have created. I have analysed a old rennovated unit in a lowrise block in a great school zone close to Melbourne city with a NET yield of 4% that is growing and avg cap growth at 6-7% a year over the past 10 years. That net yield includes all maintenance costs funded by the body corp’s sinking fund – could rent for 430pw+ (more if Airbnb), body Corp is only 1.8k a good chunk goes into the sinking fund. Sure houses can have greater upside due to development potential but appear much more speculative and harder to hold at this point due to it being a crowded trade with developers, emotional owner occupiers, investors competing to buy in with very poor net yields closer to 2% and thats without provisioning for maintenance. This requires houses to outperform units in a cap growth sense by around 3% just to breakeven. Am I missing something here for the average buy and hold investor?

By: Steve McKnight

Steve McKnight — Fri, 08 Sep 2017 01:59:12 +0000

Thanks for contributing.

Just remember that depreciation is not a free hit. It is an accounting allowance against the periodic cost of wear and tear, and to create a cash reserve for eventual replacement.

– Steve