What Kind of Property Makes the Best Investment?

What Kind of Property Makes the Best Investment?

Investing in property is one of the most effective ways to build long-term wealth, but with so many options available, how do you determine which type of property delivers the best return on investment?

Is it a freestanding home in a high-growth suburb, a low-maintenance apartment with strong rental demand or a commercial asset offering long-term lease security?

The answer isn’t one-size-fits-all – it depends on a number of variables, including your financial objectives, risk tolerance and ability to leverage market trends to your advantage.

Property has proven to be a resilient asset class, with national dwelling values increasing by 382% in the 30 years to July 2022, according to CoreLogic.Furthermore, 65% of Australian real estate professionals forecast that house prices would rise further in 2025, driven by improving affordability, rising incomes and the potential of cuts to interest rates, according to the CoreLogic report, Decoding Real Estate 2025.

Implementing the best property investment strategies can help investors manage risk and optimise returns. Investors who adopt strategic, data-driven approaches tend to achieve the highest capital appreciation and rental yields. However, not all properties perform equally – choosing the right type of asset is critical to maximising returns and mitigating risk.

Residential properties

Investing in residential property can be a powerful strategy for wealth creation. Whether you’re looking for long-term capital growth, strong rental yields or an affordable entry into the market, there are several property types to consider. Each comes with its own benefits and challenges, depending on factors such as location, demand and ownership costs. Below, we explore the most common types of residential properties and what makes them attractive to investors:

 1. Houses

These are detached dwellings, commonly found in suburban areas, offering privacy and land ownership. According to the 2021 Census, 70% of private dwellings are houses. Houses are a popular investment option because they offer long-term capital growth potential, particularly in high-demand suburbs. One of the biggest advantages of houses is the high land-to-asset ration, as land generally appreciates over time (while the dwelling depreciates). Investors can also add value through renovations or redevelopment.

However, houses require higher upfront capital and ongoing maintenance. They may also yield lower rental returns than apartments, as tenants are less likely to pay a premium for extra space unless located in highly desirable areas.

 2. Apartments and units

Apartments offer investors a more affordable entry point into the property market, particularly in major cities where housing prices can be prohibitive. They tend to generate higher rental yields due to their location in high-density areas where tenant demand is strong. Additionally, apartments often require less maintenance, as body corporates manage building upkeep.

However, apartments typically appreciate at a slower rate than houses due to their low land-to-asset ratio. Investors should also be aware of strata fees, which can reduce overall rental yield.

 3. Townhouses

Townhouses offer a compromise between houses and apartments, providing more space while still being relatively affordable. They are especially popular in suburban developments, where they appeal to young families and professionals seeking a balance between affordability and lifestyle.

One downside of townhouses is that they often fall under strata management, which means investors will need to budget for body corporate fees. That said, they typically have higher rental yields than standalone houses and appreciate more than apartments.

 4. Duplexes and semi-detached homes

Duplexes and semi-detached homes consist of two separate dwellings that share a common wall, offering a unique investment opportunity. These properties provide an affordable alternative to free-standing houses while still offering some of the benefits of land ownership. Investors often find duplexes attractive because they can generate dual rental incomes, effectively increasing yield.

Additionally, semi-detached homes and duplexes are often located in established neighbourhoods, making them appealing to both tenants and owner-occupiers. However, investors should be aware of potential challenges, such as shared maintenance responsibilities and limitations on renovations due to strata or local council regulations.

Commercial properties

Commercial properties, such as offices, shops and industrial sites, can offer significantly higher rental yields when compared to residential properties. Lease agreements tend to be long-term, providing consistent income streams for investors. Businesses also tend to be responsible for property outgoings, reducing expenses for landlords.

However, commercial real estate is highly sensitive to economic cycles. During downturns, vacancies can remain high for extended periods. Additionally, commercial property often requires a larger deposit and larger capital investment, making it a less accessible option for first-time investors.

Vacant land

Investing in vacant land offers flexibility, allowing investors to develop residential, commercial or industrial properties based on market demand. Land in growth corridors can experience strong appreciation, particularly in areas undergoing significant infrastructure investment. However, vacant land does not generate immediate rental income, meaning investors must cover holding costs until the land is developed. Zoning restrictions and development approvals can also delay construction.

Navigating the property investment market requires expert knowledge, local insights, and a strategic approach. BFP Property Group, a trusted real estate investment agency in The Hills district of Sydney, specialises in guiding investors toward the most suitable opportunities. Their expertise ensures tailored strategies that can help investors secure the right property at the right price. Whether you’re looking for off-market properties, guidance from a commercial property buyer’s agent or assistance from an investment property buyer’s agent, BFP Property Group is ready to assist.

If you’re serious about buying an investment property or building an investment portfolio, reach out to BFP Property Group. Their experienced property buying agents will guide you through the process, ensuring you make informed decisions that align with your investment goals.