Houses Or Flats? Which Is A Better Investment Choice?

Houses Or Flats

This is one of the most popular investment debates in the property investment circle. It’s most likely that you will come across people who have strong opinions about both kinds of investments. For those who do not like to pay ground rents and service charges on flat, the house will seem the best investment option. On the other hand, those who are looking for higher yields on investment and lesser maintenance costs, investing in flats will be the best choice. Having had firsthand experience in both types of investments, here I am giving you the Ifs and Buts of both for you to see which will suit you the best.

Buying A House To Let – The Pros

  • Easy finance options for single family units
  • Ability to invest in a property at market value, convert those into flats, create leases, and either mortgage or sell those flats for higher profits
  • No issues with common areas and its maintenance
  • No high service charges
  • A house can be re-sold easily as a large section of people are interested in purchasing houses rather than flats
  • Larger land size offers flexibility to develop, extend or convert the property thereby adding value to refinance or flip
  • Has a positive impact on capital growth
  • Attracts long term tenancy

Buying A House To Let – The Cons

  • Frequent maintenance and expensive repair bills over a period of time
  • Empty houses are prone to vandalism
  • Increased wear and tear if the tenants have kids
  • Interest costs and stamp duties are high
  • Imperative to maintain even unused space
  • Start-up costs and investment costs are high
  • Lower yield can lead to lesser cash flow

Flats As Investments – The Pros

  • High demand in metro areas, hence better returns on investment
  • When bought in bulk, one can enjoy better discounts
  • Can be converted easy – a kitchen can become an extra bedroom and vice versa
  • Risk is widespread, hence the cost of holding an untenanted property becomes bearable
  • Easy to build an investment portfolio as more number of flats can be purchased at the same time
  • Investing in flats from management companies can get you properties at highly discounted rates as some cannot be mortgaged
  • Maintenance cost of the common areas is shared with all the owners in the property thereby reducing its impact on your pocket
  • Changing lifestyle trends have led to people preferring flats to independent houses
  • It is possible to buy good quality flats for about 2/3rds or half the price you may have to pay for a house
  • Low investment and start-up costs in comparison to houses

Flats As Investments – The Cons

  • May not be able to convert the property into an HMO to reduce voids and increase cash flow
  • High concentration of flats in a particular place can lower capital and rental value
  • “Share of the freehold” can give the best or worst of both worlds depending how well others work together to maintain the property
  • Ground rents for flats can increase by leap and bounds over time
  • Harder to obtain finance on leases less than 80 years
  • Higher turnover of tenants
  • Hidden high maintenance costs
  • Some have high ground rent and service charges

The Judgement

Typically speaking there is no right or wrong answer when it comes to this debate. It is best that investors decide on what favours them the most. The kind of property that delivers on their objective and offers the highest return on investment will be the best choice. This varies among investors. Hence, invest with choice and freedom while keeping the interests of your profits.

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