Many people find themselves stuck between an apartment versus an investment in a home. Both investments have great potential, and they provide different types of returns. Some investors enjoy a stable income through rent payments, while others are interested in the property’s appreciation over time.
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 objectives. Fortunately – by the end of this article – you will know what works best for you!
Is it better to buy a house or an apartment for investment?
When considering buying a home versus residential real estate, there are a few different things to consider. The location is the key. Try to find a property in a desirable location that attracts ideal tenants. A great location will allow you to enjoy capital growth and rental yield.
- capital growth Refers to the process of increasing the value of your property over time.
- Rental Yield It is the money you earn from rental income, represented as a percentage of the property value. To determine your rental yield, calculate your weekly rental income. 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 buy a property directly from the property owner or through a real estate broker.
Investing in a home
When it comes to capital growth, buying a home generally trumps investing in apartments. Because you own the building and the land together, you have an appreciation for 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 tenants than single apartments. However, you are likely to spend a lot more on buying a home than if you choose to invest in apartments. You should keep this in mind when considering down payments and mortgages.
Invest in an apartment
Finance is a big consideration when considering investing in apartments versus investing in a home. If you are working with limited finance, you will likely want to invest in apartments. In general, apartments cost less per unit than houses (although location will play a large role in this). This makes apartments an ideal investment for the first time! Most apartments will not require much maintenance, such as mowing the lawn. It is possible that you will work with a legal person who will do some maintenance work. When looking for apartments to invest in, be sure to check all the maintenance costs for which you will be responsible. These will vary from drug to drug.
Investment returns on apartments vs. homes
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. However, the rental yield is only a portion of the returns you can generate. As mentioned earlier, capital growth is also an important factor when comparing potential investment properties for an apartment versus a home. Although you will likely see some capital growth with an apartment, homes usually offer a better return in this regard.
How to invest in houses or apartments without buying a property
So, what if you want to invest in a house or residential real estate, but don’t actually want to king Property? Well, you actually have a few different options!
individual characteristics
Services like CrowdStreet allow you to invest in certain properties without having to purchase anything. They often allow you to invest in different types of real estate. Besides homes and apartments, commercial real estate is a combined offering. However, you may need to count for this type of investment. If you’d rather avoid residential investments, consider a commercial-only offering like First National Realty Partners instead.
real estate investment funds
Interested in combining the power of crowdfunding with the immediate diversification of REITs? If so, then services like Fundrise are worth looking into. REITs offer low minimums and stable returns, and are ideal for investors who prefer a “laissez-faire” approach.
Alternative real estate investments
While many investors limit themselves to comparing home versus apartment investment options, there are other types of real estate investment worth considering. Have you thought about investing in agricultural land? AcreTrader real estate investment platform 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 invest directly in a local business for as little as $100 up front.
Summary
When considering home versus apartment investment options, it is important to compare all the options. For investors who don’t mind managing property, buying a home or apartment is a great way to invest. Homes provide excellent capital growth, while apartments are ideal for first-time investors. Of course, not every investor wants to be fully responsible for their holdings. If you consider yourself a “passive” investor, then one of the online real estate investment platforms might be the best fit. With so many options to choose from, you will be able to enjoy the returns without dealing with property management.
No matter which path you choose, any type of real estate investment can be highly profitable. Analyze your financial capabilities, do your research, then start investing today to get a great return in the future!
