Let's look at the differences between home units and houses.

This really requires you as the buyer, to know what it is you're trying to achieve and when you wish to achieve it, in order to determine which property type is the right choice for you.

Home units or houses, besides having their obvious differences have many subtle differences that play out over time. Therefore an understanding of these more subtle differences is important if you are to receive the most benefit and profit.

What's Your Exit Strategy?

No one property type is better than the other as I have discovered over time. I continually buy both units and houses depending on my exit strategy. Or course I know my exit strategy before I purchase my investment property. My exit strategy may be to keep a property as a 'buy and hold', 'flip' to another buyer, or vendor finance to a purchaser using a lease with an option or wrap around mortgage.

Please be aware that the information I'm about to impart is based on 13 years experience selling houses and home units both here and in the United States using all of these exit strategies. For this article, the exit strategy I'll use is vendor finance using a lease option or a wrap around mortgage.

You may also not share my view point, that's why you should always get professional advice before undertaking any sort of investment.

Where To Start?

When you search for a property, you may ask yourself which property type is best-a house or a home unit?

Home units are usually cheaper and therefore are easier for you to buy which have obvious advantages. You'll find they are just as easy to vendor finance as houses. Because there are as many people in the market place who are looking to get into a home unit as there are trying to get into a house.

Overall home units are cheaper to buy than houses. You'll find the yield return (cash on cash return) is greater if you purchase a home unit. But if a lender requires more of your funds be invested as deposit in a home unit versus a house, the house will have a higher yield return or (cash on cash return).

If you find that lender requirements are the same on both then home units can be great cash flow investments as you have less hard dollars invested and returns are higher.

Units Increase in Value at a Slower Rate

Though it's important to note that a home unit has a lower proportion of land allocated to it versus a house and since it's the land that appreciates over time and not the structure, overall units tend to increase in value at a slower rate than houses in a rising market and fall in value faster in a declining market.

Also a home unit will attract a different type of buyer versus a house. Typical home unit buyers may be investors, singles, couples who haven't yet had children or people who are retired.

Home units appeal to those who may be more transient like younger singles or couples who will eventually move once they start having children.

Selling to other investors can be quite profitable for all parties but selling to investors has another set of rules.

I have found over time that those who buy home units through vendor financing are less apt to stay---opting to leave before their installment contract is finished as is their right---to refinance or sell. But it's something for you to consider, depending on what your exit strategy is for your property.

Houses are more expensive but it's important to not concern yourself so much with the price of the house but more importantly your financial exposure or how much of your funds are invested in the house.

Houses hold their value better than units and it is much easier to have your buyers refinance you in a shorter period of time allowing you to receive your profit quickly and invest again if you so wish.

Finally, it's important to mention that people who purchase houses are more apt to make repairs to upgrade their property because they have made the mental shift from unit dweller to property owner. We call it a 'home owner's mentality'. (As many of you know, my philosophy is that you shouldn't be spending a lot of money upgrading your property before on-selling.) Home owners are far more likely to invest in their property this way because they aren't living in a unit, they're living in a house.

We dedicate a complete section to this subject in our home study course and also spend more time on this in our Boot Camp. It's important that you have an understanding of both types of investment because it will impact on your potential profits.

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