01/05/2007
Should I buy a unit or a house?
Q: I’m ready to buy my first property, but I’m confused. Should I buy a unit or a house ?
A: Unless the unit, villa, townhouse, apartment (strata) is incredibly unique like it has harbour views, I prefer to buy houses (Torrens). Why….
Lets do a comparison:
John Smith buys a unit (strata)
Steve Brown buys a house (Torrens)
John Smith buys a unit in a block of 10 units. There’s nothing unique about the block of units. If the block of 10 units equates to 10% of land per unit (10 units x 10% land = 100% of land)
Verdict – John Smith controls only 10% of the land.
Steve Brown buys land with a house on it. There’s nothing unique about this property either but he owns 100% of the land.
When a unit, villa, townhouse, apartment or House is built, it depreciates (goes down in value) – just like when you buy a car and drive it off the lot.
Land appreciates (goes up in value) in growth areas. So if building depreciate and land appreciate – why would you choose 10% of the land when you can have 100% of the land.
Also, I buy property to empower myself, not to make me powerless or restricted.
Strata (unit, villa, townhouse, apartments) can be the most frustrating title to have within property investing. What the Strata ‘Body Corporate’ want – they normally get. You are powerless in this situation because you only control 10% of the land/property.
Restricted:
For both scenarios, when the buildings get old, Steve Brown can knock over his house and build a bigger/better one, but John Smith cannot because the whole block would have to be knocked down. John would have an uphill battle trying to convince the other owners + strata that it would be a good idea.
Paul’s Tip – Power goes to the person who controls the land. Will it be you or strata?
Question answered by Paul Giezekamp, director of Property Secrets.
