In recent times, affordability and a growing number of single person households have made one-bedroom units and studio apartments popular investment choices. So, is it worth investing in a one-bedroom unit?
The main advantage of investing in a one-bedroom unit is the opportunity to secure a lower purchase price than larger apartments.
For singles and younger investors especially, one-bedroom units can offer a cheaper entry point into the property market that will provide lasting returns, provided you invest in the right area and unit block.
Single bedroom units also have the benefit of being relatively low maintenance, with less space to look after. For singles, they also offer a good alternative to shared living arrangements.
While one-bedroom units and studio apartments are cheaper to purchase, they tend to be more expensive per person to rent which can limit the market of people wanting to rent or buy them. For this reason, some investors shy away from one-bedroom units, but they can still make excellent investment properties.
Generally, investing in one-bedroom units in blue chip locations is reasonably low risk, as there tends to be more consistent buyer demand and long-term capital growth in these suburbs.
If you are considering a one-bedroom unit investment, it’s best to aim for those positioned in boutique blocks with limited supply, as they are cheaper to sell or rent than two-bedroom units. The key is to avoid areas with an oversupply of unit blocks as there can be several units up for sale or for rent at any one time, making it more competitive to secure tenants and buyers.
The one-bedroom unit is not for everyone, and the right investment option for you will depend on your particular budget, lifestyle and preferred living arrangement. Regardless of whether you invest in a one-bedroom or two-bedroom unit, you should aim for a property that is well-positioned and that ticks all the boxes: plenty of natural light, a lock-up garage, large-sized bedrooms, an additional bathroom, priced within 10 to 20 per cent of the median price for that area.
Put yourself in the renter’s position and look for a property that would best suit their needs.
Here are my three tips for investing in units:
1. Look for good parking
A simple lock-up garage can increase the marketability of your unit to tenants by around 50 per cent. It’s definitely risky to purchase something with no lock-up garage or restricted parking options.
Limited parking presents a big challenge in inner-city areas and if you can offer prospective tenants easy to access parking, you’ll give yourself an automatic edge over other units on the market.
2. Invest in smaller blocks
Units in smaller blocks can be easier to tenant and sell later on as they are unique and there are usually fewer available for rent or sale at any one time.
By contrast, units in big blocks are susceptible to value drops whenever another landlord in the same building knocks down the rent or reduces their price for a quick sale. Units located in smaller blocks also tend to have lower strata fees than bigger blocks. The latter often require additional maintenance expenses and rarely provide any more rent or capital growth.
3. Check ongoing amenity and strata fees
Be careful about investing in unit blocks with fancy amenities such as a lift, a gym, swimming pool or 24-hour concierge. While these might look attractive on paper, they generate high strata fees.
It’s also advisable to purchase the strata report for a unit building to confirm the strata fees you’ll have to pay each month. This will show you building insurance records and activity over the past few years and help you avoid any unexpected expenses in the future.
Chris Gray is one of Australia’s leading independent property experts, hosting "Your Property Empire" on Sky News Business Channel, and previously the Financial Judge on Channel 10’s The Renovators and the Property Expert on Channel 9's MyHome TV.
Chris’ knowledge comes from being a qualified accountant, mortgage broker and buyers agent, but more importantly from having personally invested in property from the age of 22 and having semi-retired from the age of 31.
He is the founder and CEO of "Your Empire", a specialist property buyers agency which builds property portfolios for time-poor people – searching, negotiating, renovating and managing property on their behalf, providing an insight into market conditions and buyer and seller sentiment.