What’s better for investors – one- or two-bedroom apartments?
When you’re looking for the best investment property suburbs in Sydney, Neutral Bay is a natural choice. And when you’re looking for Neutral Bay property to invest in, apartments are at the top of the list. They are popular with renters and don’t need as much maintenance as a family home.
But when you buy a Neutral Bay apartment, should you invest in one bedroom or two? There are definitely pros and cons to both that you will need to weigh up when making your decision.
Let’s break it all down.
What are the benefits of a two-bedroom property?
More income: the first and most obvious benefit of a two-bedroom apartment is that you can charge more rent. That means more rental income coming in and a potentially higher rental yield.
Higher return: Because the property market tends to grow in percentages, the higher price you pay for a two-bedroom apartment will also mean you are likely to have a higher return when the time comes to sell. Putting these two together means that, at the end of the day, you have a much higher chance of walking away with a greater overall yield.
Longer tenancies: A two-bedroom apartment is also more likely to attract longer-term tenants. This is because you are likely to have a couple move in then welcome their first child. They will stay until a second baby comes along or they decide they are ready for more space but these days some families are happy to raise one child in a two-bedder because it is convenient and low maintenance.
Higher costs: The higher costs of a two bedder that result in higher yield also come at a price. You will need to do your sums to ensure the rent balances out the cost of the loan without impacting your finances too much.
What are the benefits of a one-bedroom property?
The first benefit of buying a one-bedroom property is clearly the lower costs. There are actually a number of reasons that costs can be lower for one-bedroom apartments beyond the purchase price.
Lower outlay: With a lower mortgage to repay, you may be left with a little more flexibility in your budget.
Less wear and tear: Because you are more likely to have singles or young couples in your one-bedroom apartment, they are considerably less likely to do damage than a family. With a one-bedroom apartment, you can expect a lower amount of wear and tear.
Less maintenance: That one less room is also less floor space that might need maintenance over the period of your ownership, again saving you some money.
Easy to find tenants: A benefit outside of the lower costs is that it can be easier to find tenants for a one-bedroom apartment. Many people looking for housing in Neutral Bay are doing so because of the suburb’s proximity to the Sydney CBD. This means that there will be a lot of upwardly mobile singles and couples whose budget is best suited to a one-bedroom apartment.
Downsides of a one-bedder
Less return: Of course, the obvious downside to a one-bedroom apartment is the smaller return in the long run, and you won’t be able to charge as much rent as for a two-bedroom apartment, so your rental yield will be lower.
Higher turnover: If you have a young couple or student renting the place, they may only stay for two or three years before they decide to move on.
Making the decision
It should be evident that the decision you make to buy a one-bedroom or two-bedroom investment apartment in Neutral Bay is mostly down to budget. The other considerations are worth investigating, but your budget will easily be your biggest constraint.
There are, however, a few other things to think about with either a one or two-bedroom apartment beginning with the rest of the apartment.
Don’t forget about the other rooms. Bedrooms are vital but so is the rest of the space.
Think about:
– What condition is the apartment and building in?
– How is the location? Close to parks or schools or public transport?
– Is there storage and how much?
– Is there an outdoor space? How usable is it, and how well maintained?
– Are there views? Neutral Bay is a picturesque suburb with lots of views. An apartment with views is a bonus.
– How much work needs to be done on and around the property?
– What are the strata fees?
Sometimes, a well-maintained, newer one-bedder may be a better investment than an older two bedder because of renter appeal and reduced likelihood of the need for major maintenance. Talk to us about the pros and cons if you’re weighing up your options.
Get the help you need
HPA are the Neutral Bay experts when it comes to buying, selling and property management. Let us help you find the perfect property and decide which apartment size is best for your investment when you buy your Sydney real estate. Feel free to get in touch today.
