Buying a townhouse is a good investment. Buying a home at any stage of life is a big decision. For first home buyers, buying a townhouse can be a great footprint into the property market, while savvy investors can find a well located property with low maintenance.
Not everyone wants a townhouse. At Crest Property Investments, we help source brand new and off the plan properties for buyers. In our daily experiences not all property types suit everyone, but we wanted to take the opportunity to highlight some of the key benefits that may entice you to consider them in the future. While others may be in love with a standalone home. No matter, in this market insight we highlight some of the reasons why buying a townhouse is a good investment.
1. Townhouses are a hybrid. It can be as big as house but be designed to a unit
Modern townhouses are being careful designed with larger internal floor plans than previously developed. The main difference between a spacious townhouse and a stand alone house is the fact that a townhouse has smaller external area. In some cases, the external can be either a balcony or courtyard. It can sometimes have both. Townhouses also share a plot and may have a small shared communal space such as a driveway, but the internal area is built up rather than a single storey.
In recent years, townhouses have come in both two levels and three, while some are now featuring a secured basement to allow for more living space from the ground level and up. For investors, townhouses are a lower maintenance asset to own with tenants also appreciating not being committed to maintain the gardens.
Also remember that owning a townhouse means you also own the land.
2. Better affordability to a house
When investing in property, its the land component that is more expensive that than build. Having a larger internal and smaller external area allows the property’s overall price tag to be more affordable. Of course a house 35kms from Melbourne will be cheaper than a townhouse in South Melbourne (which is less than 3kms from the city), but this is not what we mean. If you compare a townhouse to a standalone house to in the same location, the price can be substantially cheaper. It’s not un heard of to see a $500,000 price difference in certain metropolitan suburbs.
3. Location and convenience
Many new and off the plan townhouse developments are superbly located in highly demanded areas, while they are also often conveniently located close to amenities and public transport. For investors, rental demand is always higher if you have a property located in an area that offers a great social life and provides a prompt commute to the Melbourne CBD.
Sourcing a traditional house within walking distance to a train station or a school zone can be difficult to find while they can be heavily priced at a premium.
4. Modern floor plans
Many older tradition standalone homes are outdated. They often have the kitchen away from the living or lounge area, they can lack natural light and often have obsolete appliances. The colour schemes and designs can also look very tired. Most investors want a property that offers longevity and a good tenant. Many sophisticated people looking to rent, often prefer a nice brand new home that presents well. New townhouses include great open floor plans, with only the kitchen island bench separating the living area. They have large windows that can be floor-to-ceiling, while the stone benchtops and splashback bring a classy finish to the home. Bathrooms are coming with larger showers, tiles from floor-to-ceiling and have some fine touches such as modern mirror designs, double basins and better energy efficiency.
5. Rental yield
A rental yield is the annual rental income received or forecast to receive as a percentage of the total value of the property. A good rental yield determines the rental income you’ll receive.
In regards to residential property investments a rental yield of above 4% is seen as a very good return. The more expensive a property, the harder it is to continue to increase the rent to match the capital value. Townhouse generally return a higher rental yield you have the ability to lease the entire property. For a house and land, you are only renting the house, not the land. It may have a large backyard, which may attract a tenant, but its difficult to increase your rental yield if a townhouse next door is worth less and charging less rent.
What should an investor do?
Buying a townhouse is a good investment. Sensible and strategic planning will see you find some great investment value in the property market. Be mindful, not to absorb half a story from friends and family. Seeking professional advice will help source the right property for you.
If you are a property investor, buy when you can afford and maintain a long term time frame. Employing some simple principles will delivery the returns you desire.
If you are looking to buy a property (either to occupy or invest), please don’t hesitate to contact us. We can help source and negotiate a deal that’s right for you. We do not charge buyers a fee to help you purchase a property.
Our YouTube channel and Market Insights also provide a wealth of information to assist you with many areas relating to property.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more, please contact us. We welcome the opportunity to assist you.
June 2022
