By: Jeremy Biberdorf
November 9, 2022
Many people find themselves caught between an apartment vs house investment. Both investments have great potential, offering various types of returns. Some investors enjoy steady income via rent payments, while others are more interested in property appreciation over time.
So, is it better to invest in apartments or houses? Well, the answer varies from person to person. The best option depends entirely on your investment goals. Fortunately—by the end of this article—you’ll know which is best for you!
Is it Better to Buy a House or Apartment for Investment?
When considering buying house vs apartment properties, there are a few different things to consider. Location is key. Try to find property in a desirable location that will attract the ideal tenants. A great location will allow you to enjoy both capital growth and rental yield.
- Capital growth refers to the process of your property’s value increasing over time.
- Rental yield is the money you make via rental income, represented as a percentage of the property value. To determine your rental yield, calculate your weekly profit from rent. Multiply this number by 52, then divide it by the price you paid for the property. Finally, multiply this number by 100 to determine the rental yield percentage!
You can purchase property directly from the property owner or through a realtor.
Investing in a House
When it comes to capital growth, purchasing a house generally beats apartment investing. Since you own both the building and the land, you enjoy appreciation from both! As the owner, you can make renovations at will, adding value to the home. As an added bonus, rental homes tend to attract more stable renters than individual apartments. However, you’ll likely spend far more purchasing a home than if you chose to invest in apartments. You should keep this in mind when considering down payments and mortgages.
Investing in an Apartment
Funding is a big consideration when considering apartment vs house investments. If you’re working with limited funding, you’ll likely want to invest in apartments. Generally, apartments cost less per unit than houses (although the location will play a big factor in this). This makes apartments the perfect investment for first-timers! Most apartments won’t require much upkeep, like mowing the lawn. You’ll likely be working with a body corporate, which handles some of the upkeep. When looking for apartments to invest in, make sure to check all the upkeep costs you’ll be responsible for. These will vary from property to property.
The Returns of Investing in Apartments vs Houses
The potential return is important when considering a house or apartment for investment purposes. You can calculate the rental yield for a specific property using the above process listed above. However, rental yield is only part of the returns you could be making. As mentioned earlier, capital growth is also an important factor when comparing the potential investment property of an apartment vs a house. Although you’ll likely experience some capital growth with an apartment, houses usually offer a better return in this regard.
How to Invest in Houses or Apartments Without Purchasing Property
So, what if you want to invest in house or apartment properties, but you don’t want to actually own the property? Well, you actually have a few different options!
Individual Properties
Services like CrowdStreet allow you to invest in specific properties without needing to purchase anything. They often allow you to invest in various types of real estate. Besides houses and apartments, commercial real estate is a common offering. However, you may need to be accredited for this type of investment. If you’d prefer to avoid residential investments, consider a commercial-only offering like First National Realty Partners instead.
Real Estate Investment Trusts
Interested in combining the power of crowdfunding with the instant diversification of REITs? If so, services like Fundrise are worth looking into. Offering low minimum investments and consistent returns, REITs are ideal for investors who prefer a “hands-off” approach.
Alternative Real Estate Investments
While many investors limit themselves to comparing house vs apartment investment options, there are other types of real estate investing worth considering. Have you considered investing in farmland? Real estate investing platform AcreTrader allows individuals to invest in farms across the United States. It claims to offer an annual appreciation of 7-9%, making it an attractive alternative to traditional real estate investing. Another alternative is Mainvest, which enables individuals to directly invest in local businesses for as little as $100 upfront.
SUMMARY
When considering house vs apartment investment options, it’s important to compare all of the options. For investors who don’t mind property management, purchasing a house or apartment is a great way to invest. Houses offer excellent capital growth, while apartments are ideal for first-time investors. Of course, not every investor wants to be wholly responsible for their properties. If you consider yourself a “hands-off” investor, then one of the online real estate investing platforms might be best. With plenty of options to choose from, you’ll be able to enjoy the returns without dealing with property management.
Regardless of which route you choose, any type of real estate investment can be extremely profitable. Analyze your financial capabilities, do your research, then start investing today for a great return down the road!
Related Real Estate Investing Reviews:
- First National Realty Partners Review
- Fundrise Review
- Yieldstreet Review
- CrowdStreet Review
- RealtyMogul Review
- Arrived Homes Review
- Streitwise Review
- EquityMultiple Review
- Groundfloor Finance Review
- Mashvisor Review
https://www.iii.org/article/coverage-for-renting-out-your-home
https://www.irs.gov/publications/p936
https://www.remodeling.hw.net/cost-vs-value/2021/
https://www.mashvisor.com/blog/investing-in-apartments-vs-investing-in-single-family-homes/
https://www.crowdstreet.com/
https://fnrpusa.com/
https://fundrise.com/
https://acretrader.com/
https://mainvest.com/
Definitely go for a house with land if that’s an option for you.
They can’t build more land, so any property with land will hold more value and increase in price faster as land becomes more scarce.
We’ve considered the idea of buying a rental property, but I think we might be more the REIT kinda people. Our portfolio isn’t big enough to absorb the risks involved in running a rental property. Especially one that’s out of town, which it likely would be because our market is pretty pricey right now.
I acquired several pieces of property from my mom and hated every minute of being a landlord. So I sold every one outright except for one which I am selling to the tenants contract for deed. If I were going to get back into rentals I’d probably go for the apartment building. That way, you have other apartments being rented to help offset the loss of income should a vacancy occur.
I don’t really think of my home as an investment…it’s my home first. If it becomes an asset I can leverage later in life, so be it though. 🙂
of course Apartment 🙂 not need argument 🙂
I consider my rental property as an investment, though if I were living in the home, I would consider it more of a liability. Good article!
House will be my answer. I want my family to have their own personal spaces each member (even pets), including backyards. House also covers long term and stability plans which is more practical for me. Thank you for this article. It is really helpful.
I’m pretty new at home owning but it’s been pretty rewarding (and a big learning curve) so far. I live in LA where real estate is ridiculously high and I’m happy and lucky enough to own a home. Most people will never be able to afford a home in this city unfortunately.
Nice article! Investing in a property is, indeed, a good idea. I think you should consider some factors before you make an investment decision. First, you need to choose the place or location for your property. Is the location accessible and convenient? How about the security and neighbourhood surrounding the area? The property’s quality is a very important factor to consider, too. Is the developer reputable (this is particularly applicable to condominiums)? And lastly, you need to make a thorough assessment on the property’s capability to maintain appropriate amortization and maintenance. In other words, you need to consider “money” or your budget.
Personally, I prefer to live in an apartment or condo because of its accompanying low down payment, amenities and benefits and security features. Among the top residential properties in Singapore are Reflections at Keppel Bay, Resort World Sentosa, Highline Residences, and many more.
The lifestyle and real estate market trend should be greatly considered when choosing between an apartment and a home. A local real estate agent can help with this information.
House or apartment? It all depends on the rental market trends and figures in your local area. The best way to start? Work with a local realtor with good investment acumen.
Thanks for giving me some good questions to ask myself while deciding what kind of property I want. I’ve been renting a townhouse, but since my goals are not really long-term investing in an apartment may be a better choice. I’ll be sure to put a lot of thought and research into the investment!