Renting out houses as investments make pretty good financial sense over the long term (house prices tend to double in price every 8 to 10 years) but what about Apartments?
Firstly you have to ask yourself, what am I investing for? Is it long term capital growth or short term income from rent? Generally speaking older people invest for short term income rather than long term growth, fotr obvious reasons!
Apartments typically aren't decent capital growth investments, this is because property prices often reflect the cost of land and thus this land cost is not reflected in the cost of the unit itself. Developers are pulling out all sorts of ways to sell apartments as well as 'rent guarantees'. Whilst this may sound good, think about what happens after the rent promise runs out. Also will the company offering the guarantee still be in business to pay out? Most Real Estate agents know that these guarantees are simple marketing ploys and tend to reflect the limitations in the Apartment market.
Also bear in mind that mortgage financing for Apartments is tricky with most Banks not going over 60 or 65%. That might be OK for you, but what about your potential buyer a few years from now?
Apart from not owning the land, another factor is the potential over supply. Developers can easily put up a block of new Apartments, quickly and therefore further diluting the potential market. Old rule of supply and demand kicks in and as an individual you have very little control over it.
The fact above together with steep Body Corp fee's and repair issues means that Apartment buyers will need to cautiously think before making a purchase. As for rental return, around 7% would warrant a house purchase but near 10% is required for Apartments - 31366
Firstly you have to ask yourself, what am I investing for? Is it long term capital growth or short term income from rent? Generally speaking older people invest for short term income rather than long term growth, fotr obvious reasons!
Apartments typically aren't decent capital growth investments, this is because property prices often reflect the cost of land and thus this land cost is not reflected in the cost of the unit itself. Developers are pulling out all sorts of ways to sell apartments as well as 'rent guarantees'. Whilst this may sound good, think about what happens after the rent promise runs out. Also will the company offering the guarantee still be in business to pay out? Most Real Estate agents know that these guarantees are simple marketing ploys and tend to reflect the limitations in the Apartment market.
Also bear in mind that mortgage financing for Apartments is tricky with most Banks not going over 60 or 65%. That might be OK for you, but what about your potential buyer a few years from now?
Apart from not owning the land, another factor is the potential over supply. Developers can easily put up a block of new Apartments, quickly and therefore further diluting the potential market. Old rule of supply and demand kicks in and as an individual you have very little control over it.
The fact above together with steep Body Corp fee's and repair issues means that Apartment buyers will need to cautiously think before making a purchase. As for rental return, around 7% would warrant a house purchase but near 10% is required for Apartments - 31366
About the Author:
Looking for trustworthy mortgage brokers nz? Contact The Mortgage Lender and make your next mortgage hassle free.
