Buying your first investment property is a huge step and there are a few major decisions you’ll have to make before committing to a purchase. When choosing the type of property you want to buy, there are a series of factors to consider and as a first-time investor it’s not always obvious whether a house or a unit is going to be a more profitable choice.

Your investment plan is a major factor that will determine the type of property you should be looking at. Do you want something that’s ready to go, requires little maintenance and will hopefully provide you with an income over the years? Or do you want to buy a property in order to renovate and flip it as soon as possible?

Here are some of the things you should consider when deciding to invest in a house or a unit:

BUYING A UNIT

• A unit generally costs less than a house, making it a good option if you are struggling to pull together the deposit you would need for a larger property.
• The lower cost of a unit allows you to diversify more quickly, piggybacking on your existing properties to purchase new ones sooner.
• Units can bring in high rental yields if you choose a sought after area.
• Units are often built in central locations, which are in high demand and generally bring in high rental incomes, although the initial cost is also likely to be greater for a central location.
• There are certain additional expenses that come with a unit. You will have to pay strata expenses to the body corporate toward grounds upkeep, communal facilities and so on. These fees can add up to a few thousand dollars every year, which you need consider in your budget.
• A unit may require less maintenance than a house and this is often covered by the body corporate.
• It’s generally more difficult to renovate a unit and you may need to get permission from the body corporate to do so.

BUYING A HOUSE

• Houses are more expensive than units, especially if you don’t have much in the way of savings for a deposit.
• You are completely responsible for maintenance on a house. This can add up to a lot of money and expenses are often unexpected.
• Owning your own house allows for more flexibility. You are generally able to do renovations, add extensions and anything else to add value to the property.
• The major benefit in buying a house is the value of the land. You not only hold the structure but the land on which it sits.

You may not have to pay strata fees but houses generally come with higher council rates, as well as land taxes.
Ultimately your choice should depend on the market you are looking to buy into. An area popular among a lot of families with children is probably going to put a house in more demand from renters, while an area with more single people or unmarried professionals will probably have a higher demand for smaller properties, including units and apartments.