If you’re interested in property investment, or are a landlord already, you may be thinking, which makes the best investment, a buy to let house or a flat?
Houses can be anything from a traditional family dwelling to a large Victorian terrace converted into a series of rooms. Flats are a self-contained unit in a larger block, either a converted house or a purpose-built development.
There are both advantages and disadvantages in buying either. Let us take a look at both sides.
Houses as investment properties
Advantages
- Houses have features which attract families and working professionals
There is always going to be more space and privacy in a house, features which tend to attract longer-term, more serious tenants.
- Houses usually have gardens and parking amenities
A high percentage of tenants will look for properties with gardens. If they have children and or pets, a garden will be essential. In many towns and cities, parking is often difficult, and permits are required. A property with ample off-road parking will be very attractive to tenants.
- Houses have more scope for improvement
You could convert the loft to create an extra bedroom, convert the garage to add more living space, build a conservatory or add an extension, the possibilities are endless. Larger houses can also be let as one unit or as a house share to multiple tenants.
- Houses grow in value faster
Houses usually grow in capital value more than flats. This is because flats are more likely to be leasehold, and in time, the lease term diminishes, which makes a flat harder to sell.
As much are there are great advantages to owning a house, they do carry their disadvantages, such as:
- Higher investment and start-up costs
- Garden maintenance
- High interest costs and high stamp duty
- Renting a house out to a family with children or pets could potentially result in more wear and tear
- If a house is left empty it could be more prone to vandalism than an empty flat
Flats as investment properties
Advantages
- Flats are much more desirable in big cities
Flats are the popular choice for young professionals living in cities who want to be close to work, transport hubs and amenities.
- Flats offer flexible living
Flats offer greater living flexibility due to most being on one level. Kitchens can be moved into the living area to allow for open plan living. There is less scope to do this with a house.
- Flats are more cost effective
Good quality flats are often less expensive than similar sized houses. Flats also produce less hassle in terms of maintenance responsibilities for both the landlord and tenants.
Just as there are fantastic advantages to owning a flat, they do carry their disadvantages, such as:
- Potential issues with neighbours
- Permission may be needed for flat improvements
- Unexpected bills
- Ground rent and annual service charges
- Restrictive covenants
- Usually, a higher turnover of tenants
There are obvious advantages and disadvantages to owning both types of properties. Before you start looking, it is helpful to have an idea of who you want to market your property to.
Think about the location, where you are more likely to find the kinds of tenants you want to market to. Many tenants look at specific areas related to their jobs, local schools, and amenities. If you buy a property in a desirable area, it should not be difficult to find tenants.