In today’s show buyers agent Shannon Davis, from Metropole Properties in Brisbane, explains why it is not as simple as deciding to buy a house or a unit.
Kevin: A few weeks ago on the show, I spoke to Shannon Davis from Metropole Properties in Brisbane about the advantages of flipping – where you buy a property, renovate it, and flip it over quickly; it’s an American term – opposed to a buy-and-hold strategy.
Welcome again to the show, Shannon.
Shannon: Thanks for having me, Kevin.
Kevin: This time I want to talk to you about units versus houses. Is it that simple? Is it a black-and-white issue?
Shannon: No. I think everyone likes to simplify things, just to make it easier in their heads, but it’s not that simple.
Kevin: Is it market to market, or is it me as an investor?
Shannon: Market to market, definitely. But not all land is created equal. For instance, I would prefer a unit in a highly desirable owner-occupied area than the biggest house further out where the land is much more inferior and the market depth is far less.
Kevin: So you’re still saying come closer to the city, and if you have to buy a unit to get closer to the city, then that’s what you have to do?
Shannon: Definitely. Where the market depth is more and the owner-occupier appeal is more, I would choose more. If that takes me in the inner and middle rings – which is more likely, because people like to live near their employment and the CBD is the biggest employer and provides most of the economic output – then I’m going to take an apartment rather than a house.
Kevin: There is a school of thought, when you’re talking about value, that people say that the value is in the land, therefore “I have to have a house, and the bigger the land the bigger the value.” That doesn’t necessarily follow?
Shannon: Not necessarily. Apartments do have land value, as well, so if I am to pick an apartment I’m not going to pick one in a high-rise with 150 other apartments, with an expensive lift, gym, pool, and spa. I’m going to pick a two or three story walkup that’s on about 1800 square meters, and it has a big land proportion into it but that property has more owner-occupier appeal, a greater market depth, and therefore greater capital growth.
Kevin: When you think about it, in the 150- or 200-unit block is going to have 200-odd other owners in there you have to work with to get things done in the building.
Shannon: Definitely. If there’s that type of mass, there could be ten on the market at one time, so if they all have the same aspect, and layout, and so on, then how are we going to get the sale?
Kevin: What about another aspect of units over houses, and that is if you’re looking at units, the mix of owner-occupiers and tenants?
Shannon: It makes a big difference. Owner-occupiers are house-proud, don’t mind spending the sinking funds on communal areas, and having their apartment block with its best foot forward. Whereas investors tend to not turn up to body corporate meetings and tend to be less worried about more returns on funds, and therefore, there can be a little bit more neglect.
Kevin: Even if you’re buying into a new building and you find out what that owner-occupier to tenant mix is, that’s going to change over time, too. As the block gets older, you’ll probably find that there will be more tenants coming into it as people move out and maybe go to a different block.
Shannon: Definitely. The reason I keep coming back to owner-occupiers, Kevin, is because they pay more. They’re emotional, and for them it’s their home, not a house. If you have a higher tenant proportion there tends to be just that little bit more neglect of the apartment building, the communal areas, and the comings and goings of the parties who are invested in that building.
Kevin: The bottom line: just give me your top three points if I’m deciding about units opposed to houses?
Shannon: A $400,000 house or a $400,000 apartment? I would be taking the apartment in a highly walkable, desirable area, because the smaller the dwelling, the more important the area around it – like green space, cafes, and transport facilities. That’ll be a better investment because the market depth will be greater with that one, rather than a $400,000 house further out.
Kevin: I guess it also comes to what kind of tenant you want. If you’re looking for a family, for instance, you probably are going to have to buy a house.
Shannon: I think that’s probably putting the cart before the horse, because for me, we have lots of tenants and often it’s the ones without kids who pay their rent on time and have less objections when it comes to rent rises.
Kevin: Shannon Davis from Metropole Properties in Brisbane. If you’re wondering, Shannon also has another business called Image Property Management. It’s a specialist property management business, and he is across both areas – a guy well worth talking to if you’re looking for a property anywhere in Queensland.
Shannon Davis from Metropole Properties in Brisbane. Shannon, thanks for your time.
Shannon: No worries, Kevin. Any time.