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!
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.
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!
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