If you’re considering building a property portfolio or hunting out a bargain at property auction, then you’re probably pondering which is the best investment, a house or a flat? We’re going to take a look at this question in terms of the buy-to-let market and future gains by breaking down the pros and cons for each type of investment. We’ll look at the type of tenants each property is most likely to attract, the extra features that come along with them, and what you can expect from your investment further down the line.
Buying a house as an investment
There are a lot of pros to buying a house as an investment as opposed to a flat. Whilst houses are relatively more expensive to purchase they come with extra features such as gardens and garages. These spatial additions make houses very attractive to tenants with children, pets, and lots to store.
Houses are also more desirable to affluent tenants because they are usually larger, whereas most rental flats are just one or two bedrooms, or very small studios. Even without a garage, houses often have driveway or backyard parking to keep cars safe, or a designated parking spot in the neighbourhood to rule out permits.
Typically, houses grow in value faster than flats. Due to their appeal the first-time buyers, terraced houses are easiest to sell, resulting in better capital gains than large detached properties. Although detached and semi-detached houses offer more potential for expansion.
Buying a flat as an investment
Flats are relatively cheaper than houses but there is more to consider long-term. In a flat, you’ll have to maintain communal areas and major works are often not covered; you may find yourself forking out for a new roof or cladding. You’ll have to budget for ground rent and annual service charges too. Pay attention to whether these things are rolled into one or not, and whether costs are fixed or set to increase at intervals. If you don’t you could be in for some undesirable dents in your profit.
Of course, there are pros to flat ownership too. Flats are more popular with city-workers who desire a base that’s close to work. If you choose to invest in a city-centre flat you will never be short of applicants, who are typically young professionals on a transient basis.
Before you invest in either type of property, speak to local letting agents to find out what’s popular in the area. Think about what kind of tenants you wish to appeal to, and always seek an experienced conveyancing solicitor if you decide to buy a leasehold.
Why not visit our PAA auction directory to find your next house or flat?