• Mark Sinclair

Why Houses Are Better Investments Than Units

As someone that has been investing in Australian property for the past 25 years, I have reached some solid conclusions around the debate of investing in houses vs townhouses vs units. For the record, I have held several of each asset type over my investment lifetime.

The first thing to point out is that units and townhouses are typically strata title whereas houses, including duplexes, are typically freehold title. As an investor, the title differences can have a big impact in your ability to get repairs done in a timely and low-stress manner.

For example, I had a townhouse that developed a leaking roof. Water was coming in to the residence during heavy rain and was damaging the gyprock each time. Since it was a strata title, I was unable to get it repaired myself and was forced to go via the strata manager. Strata managers are very slow. In this example they took nearly 4 months to get quotes done and then another 6 months before the repairs were carried out. By that time the internals had been further damaged and required new gyprock and re-painting - both at an additional cost to me.

Dealing with strata can be quite painful.

If it is a house then you a free to do whatever repairs you want whenever you want. Managing a house from a repairs and maintenance perspective is much easier.

The second thing to point out is that the thing that goes up in value is the land component of your investment. You are investing for capital growth so it makes sense that you want to maximum your land component. Strata title assets such as units and townhouses still have a land component associated but it is usually a lot smaller than a house. Imagine a block of 10 units on a 2000 square metre block - each unit is associated with 1 share of the land value, in this case 200 square metres only. Most houses are on 400-700 square metres.

All things being equal, a house will go up in value faster than a unit or a townhouse.

Now, there are a couple of downsides to investing in a house. First, you may not be able to afford a house - units are typically less expensive. Second, the rental yield of a unit is likely to be higher than a house - so you are likely to get a better cash flow with a unit.

I still believe houses are a more attractive investment overall.

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