Generally, when people look to buy an apartment, they can default to wanting a two bedroom as a minimum. I’ve found in Melbourne CBD over the years, people are still getting their heads around apartment living and unsure about the vertical world, though in other areas of the world living in studio apartments is a norm. So, when it comes to buying an apartment to live in or as an investment, a lot of people think they can safeguard themselves by investing into a larger apartment.
If you have the budget to purchase a big enough two-bedroom apartment, not any of this new build pokey stuff they’re constructing, then it’s worth doing your research and planting your money in one. But if you sit on the border of buying a good sized one bedroom or one plus study, then change your focus and grab it.
When you buy a one-bedroom apartment, you’ll find some things that will remain consistent with past sales history and most likely the future. Firstly, if you haven’t purchased any long-term lease properties through student housing or serviced apartments, then you will see growth. Because the purchase is usually at a lesser level than bigger apartments, the growth will most likely remain consistent in percentage, though don’t expect to become a millionaire. On the other hand, if the market topples over and crashes, you’ll find that any losses incurred are usually marginal and if there is a need to cash up, you most likely won’t stand to lose as much money as bigger apartments.
The other benefit is that the rental return is usually higher than bigger apartments. One-bedroom apartments are usually in quite high demand, especially around the Melbourne CBD. The reason being, is the city attracts a lot of single and young couple professionals who don’t need the extra space. Bigger apartments that cater for families or a few extra people may find it harder to place a tenant as the demand isn’t has high from that demographic. So due to the higher demand for one-bedroom rentals, you tend to gain a stronger yield out of your investment property and can secure a strong rental return.
Another thing to remember is because your apartment is naturally smaller, you will incur lower Owners Corporation (OC) fees. This is one of the most beneficial factors about buying a one-bedder. OC’s can creep up on you over the years and in some cases, whatever capitol growth you may have in your larger apartment, it’s not unusual to see the OC fees even out your gains. I’ve always found with the smaller apartments though, it becomes so much more affordable year to year and helps you achieve more money out of your investment.
At the end of the day, I would just suggest keeping an open mind when you’re out looking at apartments. If it’s to live in, think whether you need the extra space or not and buy accordingly. If it’s investment, I would look more into the one-bedroom apartment range and maybe purchase multiple over the years.
The following advice is of a general nature and intended as an opinion and broad guide. For all legal, financial or real estate advice you should obtain independent professional advice to do with the specific nature of your circumstances before making any legal, financial or real estate decisions.