- So what makes the best investment property?
A house or a flat?
And what are the pros and cons for each?
(jazzy jingle)
Hi, my name is Tony Law from Your First Four Houses,
and I teach people how to build a small property portfolio,
that generates a great income for them.
So they can give up the day-job, if they wish,
because then they are financially free.
If this is your first time here,
be sure to subscribe to the channel,
and click that notification icon,
so that you don't miss out on any of the free content
that I give you each and every week.
So which should you be investing in?
Houses or flats?
Well today, I'm gonna look at the pros and cons for each,
and let's start off with the pros for flats.
First, the really obvious one.
Flats are gonna be generally cheaper, aren't they?
And so if you got a little bit of cash to invest,
could you perhaps buy more than one?
Again, generally speaking,
a flat will give you a higher return on investment,
or yield, although you must always do the numbers yourself.
And I would strongly suggest you calculate
the return of investment on that flat,
and then compare it to other types of properties
in the area.
With some one-bed flats, that have maybe a bigger lounge
kind of area, could you maybe add a bedroom
by bringing the kitchen into the lounge space,
and then turning what was the kitchen into bedroom two?
You don't need to directly get involved
with any building maintenance on a flat, do you?
The cost of maintaining the building shared
and the free-holder, or the managing agent,
will typically organise all of that work for you.
Short leases, or an absent free-holder,
can mean the property is un-mortgageable.
So where's the pro in that?
Well, this is a real opportunity for you potentially
to get a fantastic bargain,
and if you know what you're doing,
you can then fix that problem.
Flats can make ideal, year-round serviced accommodation,
in some areas.
Especially, I would suggest, one-bedroom flats.
Which can obviously appeal to professional people.
So what about the cons for flats?
Because there are a few.
Well, often you can't add value in the same way
that you can with a house.
For example, with a flat,
you can't generally extend it, can you?
You can't generally go up into the loft and add a bedroom,
you can't generally build a conservatory
on the back of a flat, can you?
Et cetera.
Some flats can have high service charges.
And ground rents.
And these can really eat into your profits.
It can, in some instances, be harder to finance some flats.
For example, if the lease is less than 80 years,
or over some types of shops,
or over a food outlet, for example,
or we'd need over a certain level in a block of flats,
et cetera.
The value of the flat can drop significantly,
once the lease goes below 70 years.
And you may need to actually extend that lease.
Although, there is possible, and there are
there's a lot to that and I can share more of that
maybe in another video.
You may not be able to convert that flat into an HMO,
if this is something that you want to do.
Which, as you may already be fully aware,
can dramatically increase the amount of cash-flow
that you get from that flat.
High-rise flats attract slower capsule growth.
Generally speaking, plus cancel high-rise blocks
are often un-mortgageable.
By the way, if you're finding this video helpful,
I would love it if you could take a moment just to click
on that like button down there, it really helps me,
if that's okay.
So what about the pros for houses?
Well, first of all, finance for single-family units
is more readily available.
Lenders generally see houses as a lower risk.
They can attract longer-term tenants,
who won't uproot after six to 12 months,
and are more often likely to maintain,
or indeed, want to maintain the property themselves.
I would suggest there's more potential,
again, generally speaking,
for long-term capital growth in some areas.
There's certainly far greater potential to add value,
for example, you might be able to extend,
you might be able to add that loft conversion,
you might be able to convert that garage
into some kind of living space.
Or indeed, convert the whole building into flats,
or maybe build in the garden,
et cetera, et cetera, et cetera.
Generally speaking, there's no high-service charges,
or issues with common areas not being maintained.
Whether you're renting or ultimately looking to sell,
a house will always have a larger appeal, won't it?
Generally, a house is gonna be of appeal
to first-time buyers, to couples, to families with children,
to retired people, and obviously investors as well.
So what about the cons involved in houses?
Well, typically,
you're obviously gonna be looking at a higher investment,
aren't you?
For example, the size of the deposit
that you're gonna have to put in.
The stamp duty that you're gonna have to pay.
Perish the thought,
interest charges are obviously gonna eat into that, as well.
There's potential for more frequent maintenance
and repair builds, as there's obviously
a bigger square footage, again, generally speaking.
Plus, obviously you're not just maintaining the inside
of a flat in this scenario,
you're maintaining the whole building,
including the outside, as well.
Because of the lower yield, you may be looking,
potentially, a lower cash flow.
A house can sometimes be more likely to be vandalised
if empty.
Sadly, I've had that.
You're gonna get more wear and tear if families are involved
if you've got families with young children, for example,
generally speaking,
there's gonna be more wear and tear there.
And in some cases, you may even be responsible
for garden maintenance, although I appreciate,
in not all cases is that going to be the case.
So the question is which should you buy?
Well, the truth is, I'm gonna have to cop-out slightly here
because it completely depends on the funding that you have,
on the area that you're looking to invest in,
or the area that you live in.
On the supply and demand in that area.
But above all, it's gonna really depend on your strategy.
The strategy that you're wanting to follow.
What do you want to achieve over the longer term.
So can I make a suggestion here,
why don't you book a strategy phone call with me,
I'll put the link here, just click on that
and you can book a strategy call,
and I'm sure I can probably help you narrow down
exactly what your strategy should be.
Have you checked out my completely free
online property mini-course?
That's gonna teach you how to build
a small property portfolio that
generates a great income for you,
but without you needing to put in big deposits.
Simply click the link here to find out more.