Investing in property has long been regarded as a solid strategy for generating passive income and building long-term wealth.
One of the fundamental decisions an aspiring property investor faces though, is whether to buy an apartment or a house as a rental property.
This is a topic with wildly differing opinions, and many investors can end up mis-informed and missing out on a great investment opportunity.
At Horizon Lets we say both options offer unique advantages, however, it’s crucial to evaluate the pros and cons of each before making a decision.
Read on as we look at the key factors that can help you choose between apartment or house for your next investment.
Apartments: Compact and Convenient
Apartments, particularly those located in thriving urban areas, offer several enticing advantages for rental property investors. Here are some key points to consider;
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Lower Purchase Cost and Entry Barrier
Apartments tend to be more affordable compared to houses, making them an attractive option for investors with limited funds. This lower entry barrier allows investors to diversify their portfolio by owning multiple rental units.
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Lower Maintenance
With smaller living spaces and shared common areas, apartments generally require less maintenance and upkeep.
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Amenities and Convenience
Many apartments come with built-in amenities such as gyms, swimming pools, and communal spaces. These features can attract tenants seeking convenience and a modern lifestyle, potentially leading to higher rental demand and increased rental income.
We have heard some investors say they would never buy an apartment because of the service charges. However, an apartment building with great amenities will fetch a much higher rent. There’s also the consideration that included in service charges are insurance, maintenance of the building, fixing leaks etc. These are all things that need to be paid for with a house but at least service charges are a fixed amount each month, whilst with a house you could unexpectedly face a huge bill for repairs.
Houses: Space and Potential for Growth
On the other hand, houses present their own set of advantages;
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Potential for Capital Growth
Houses, particularly those located in desirable neighbourhoods or areas with strong growth potential, often experience greater capital appreciation over time. This can offer a higher return on investment when the property is eventually sold.
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Flexibility and Appeal
Houses typically offer more space and a sense of privacy that many tenants desire. Families and individuals looking for larger living areas, outdoor spaces, and parking options are more likely to opt for a house, thus potentially reducing vacancy rates.
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Rental Yield and Control
While houses may require more maintenance, they often offer higher rental yields compared to apartments. Furthermore, as the sole owner, you have greater control over the property and can make decisions regarding upgrades and modifications that can increase its value.
At Horizon Lets we believe if you are looking for capital growth, it’s all about location. A city centre apartment will perform better on this front than a house in a less desirable area.
Deciding between an apartment and a house as a rental property investment requires careful consideration of various factors, including budget, location, target market, and long-term goals.
Apartments offer affordability, convenience, and shared maintenance responsibilities, while houses provide more space, potential for capital growth, and greater control over the property. Ultimately, the decision should be based on your specific investment strategy, risk tolerance, and understanding of the local market conditions.
We recommend you conduct thorough research, seek advice from various property sources and other professionals (e.g. surveyors, accountant & solicitor), and weigh the advantages and disadvantages of each option before making a final decision. By doing so, you can position yourself for a successful and rewarding rental property investment journey regardless of whether investing in an apartment or a house!
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