What's better - units or house?

Question from Clare updated on 5th February 2013:

We are preparing to become property investors. In your opinion, are units as good an investment as a house? Or do they not increase in value over the years as well as a house does?

Our expert Ron Hoy Fong responded:

Investing in properties is very similar to the game of monopoly, four green houses equals one red hotel (and that can depend on the street and areas that you are investing in). Say Old Kent Rd versus Mayfair. To answer your question, I find houses will on average have a better capital growth but the yields will give a lower return on investment (ROI), whereas units will return a higher yield but slower capital growth. Ultimately all properties on average will double in an eight to ten-year period. If you have too many houses with low ROI then your serviceability will be handicapped and the growth of your portfolio will be slower. Avoid buying units in an area where tenants prefer to live only in houses. As an investor who lives in Auckland, I have chosen areas between St Luke and Sylvia Park because they are equal filled with houses and units. Also, yields can give a positive ROI especially on current low bank interest rates.

Ron loves to share his passion for property and his coaching course provides one-on-one mentoring and support that will empower you with tools, strategies and valuable insights so you can achieve investment success and become a property master.

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