I own some real estate but I do not claim to be a real estate expert.
One thing I will say about real estate that I learned a bit too late, is that in my opinion is you should focus on purchasing something with a decent sized block of land, assuming your cash flow situation can tolerate the lower yield.
I remember once reading a report (I would have to go and dig it up) showing that in New York City over a 20 year period condo prices increased 400% while prices for vacant land increased 2000%. For example according to this link:
https://www.domain.com.au/news/sydney-ho...23-gtryjd/
From March 1997 to March 2017 in nominal terms Sydney home prices increased 429%, while Sydney apartment prices 310%. The extra 0.5-1.5% in net yield is not enough to compensate for the difference, especially when you consider that income/rent is taxed every year whereas the un-realised capital gain is not taxed until/if you sell the property. Also unrealised gains can be leveraged by refinancing your property to buy another property. Also with owning an apartment/condo you potentially have less control/flexibility about what you can do in regards to air bnb, in regards to renovating or developing the exterior of the building/land, etc. A house on good block of land potentially later on you could subdivide the land or at least build a granny flat (to rent out) in the backyard.
Over time buildings depreciate in value and land appreciates in value. If you are buying in a "blue chip" city lets say for example L.A., London, Paris, Sydney, Berlin, etc where over the long-term you expect decent capital growth then buy a house or land. The extra yield you get from owning an apartment, or condo, etc will not make up for the lower capital growth. I know in Australia and its probably similar in a lot of countries in capital cities an apartment will typically have a gross rental yield 1-2% higher than a house. The difference in net yield is typically less than 1% because you have to pay a strata fee for the apartment. Now, I understand that if you are buying a house or block of land you will have to move further from the centre of the city so your choice for example may be something like:
a) Buy a 1 bedroom apartment 20 minutes walk from the centre of the CBD/downtown
b) Buy a 3 bedroom house with a good backyard 40 minutes by train from the CBD.
Assuming its just an investment and you do not want to necessarily live in the property then in the majority of cases plan b is the superior option.
One thing I will say about real estate that I learned a bit too late, is that in my opinion is you should focus on purchasing something with a decent sized block of land, assuming your cash flow situation can tolerate the lower yield.
I remember once reading a report (I would have to go and dig it up) showing that in New York City over a 20 year period condo prices increased 400% while prices for vacant land increased 2000%. For example according to this link:
https://www.domain.com.au/news/sydney-ho...23-gtryjd/
From March 1997 to March 2017 in nominal terms Sydney home prices increased 429%, while Sydney apartment prices 310%. The extra 0.5-1.5% in net yield is not enough to compensate for the difference, especially when you consider that income/rent is taxed every year whereas the un-realised capital gain is not taxed until/if you sell the property. Also unrealised gains can be leveraged by refinancing your property to buy another property. Also with owning an apartment/condo you potentially have less control/flexibility about what you can do in regards to air bnb, in regards to renovating or developing the exterior of the building/land, etc. A house on good block of land potentially later on you could subdivide the land or at least build a granny flat (to rent out) in the backyard.
Over time buildings depreciate in value and land appreciates in value. If you are buying in a "blue chip" city lets say for example L.A., London, Paris, Sydney, Berlin, etc where over the long-term you expect decent capital growth then buy a house or land. The extra yield you get from owning an apartment, or condo, etc will not make up for the lower capital growth. I know in Australia and its probably similar in a lot of countries in capital cities an apartment will typically have a gross rental yield 1-2% higher than a house. The difference in net yield is typically less than 1% because you have to pay a strata fee for the apartment. Now, I understand that if you are buying a house or block of land you will have to move further from the centre of the city so your choice for example may be something like:
a) Buy a 1 bedroom apartment 20 minutes walk from the centre of the CBD/downtown
b) Buy a 3 bedroom house with a good backyard 40 minutes by train from the CBD.
Assuming its just an investment and you do not want to necessarily live in the property then in the majority of cases plan b is the superior option.