The purpose of this article is to identify the various types of residential properties availa
ble for investors to invest in and how they each could be beneficial.

Residential property is the most popular type of real estate investment.

Among them, freestanding houses are the most desired by investors due to their high rental income and capital growth.

But they aren't the only option! 

Free standing house

A freestanding house is a very popular choice of investment for real estate investors who are just starting out.

Freestanding houses will appreciate in value much quicker, owners have a greater degree of control over the future management and when free standing houses are located on large blocks, they can possibly be split at a later stage to create new housing blocks.

Often real estate investors become investors by accident, quite often at times where they have failed to sell their home before buying a new one, so they have taken it off the market and decided to rent it out instead.

Townhouses

Townhouses are similar to freestanding houses, however, townhouses contain a common wall between one home and that of the neighbouring house, with one shared roof.

Before deciding to purchase a townhouse as your choice of residential investment, know there will be a body corporate management in place in the townhouse complex.

The body corporate management takes care of common roads, footpaths, and landscaping. Unlike freestanding homes where the investor can make changes, townhouses are not the same.

If you were to make changes to your townhouse residential investment you would first need to consult body corporate to ensure it complies with the complex colours, height restrictions, materials used and proximity restrictions.

If you are considering purchasing a townhouse for a residential investment option, remember your ownership control will be affected by the body corporate governance in the complex.

Holiday homes

There are two types of holiday homes. One being a home which is casually leased out to holiday makers, and the other being a full-time tenanted investment property.

Holiday houses in desirable locations are a good option for investors as families are always looking for a place to stay during the holiday period. There is also a chance to increase letting fees during peak period times.

Investors may own a holiday home that occasionally is rented out.

This is not classified as an investment property, but a casual letting arrangement which you have with tenants for short-term periods. If a holiday home appeals to you, ensure you have enough income in stock to upkeep the home during the periods in which it is not let out to holidaymakers.

To learn more about holiday homes, watch this on-demand webinar.

Short-term rentals

Short term rentals are rental options that tenants can choose to take on for a few weeks at a time in undesirable locations usually far away from popular attractions such as schools, the beach, CBD’s, parks and hospitals. A property located outside a popular holiday or living area will only attract short-term rentals and is unlikely to be considered a successful investment as finding tenants can be difficult.

Investors have the option to seek a paid agent to help attract tenants but it will come at as additional cost along with cleaning fees and bills (electricity, water, rates, and gas). It is recommended that an investor includes these costs into the overnight or weekly price for tenants at the property.

Long-term rentals

Long-term rentals have different features to short-term rental properties. The due diligence is much more thorough when considering long-term tenants.

When contemplating a long-term investment property investigate the areas of interest to ensure they are feasible. You should look for the proximity to facilities, the employment opportunities in the area, median rental yields and costs of property agents in the area.

Remember, short-term will not yield the same weekly or overnight rates as tenants who sign for longer periods. Long-term tenants are responsible for electricity and gas bills, cleaning and general maintenance.