Determine what to buy - one or two bedroom - Part 3

The answer to the question on whether one bedroom or two bedroom is a more desirable investment option lies within the investment parameters which are determined by the investor goals and objectives for the property investment.

Significant capital gains in property are highly likely to only occur in the long run as it requires at least one complete real estate market cycle before its potential capital growth can be fully maximised. For long-term property investors, the primary intention is to appreciate the capital gains over a long period, historically ten years or more. When we factor in the potential for prices growth, a two bedroom property is typically the outright winner with regard to the total investment return.

Short-term property investors are commonly viewed as a risk takers. Despite the fact that one bedroom property has limited space for prices growth, the short investment period means investors are given the opportunity to take advantage of their knowledge and expertise in property, not to forget the higher yield achieved in a one bedroom as an added bonus.

In connection with the affordability aspect in purchasing a two bedroom, then the basic property principle still applies. That is to say with a similar budget, it is more prudent to invest in a one bedroom property located in a blue chip suburb compared to a two bedroom property in a speculative area.

To put it in a nutshell, if our investment parameter is five years or less, a one bedroom property provides a better investment option. Should our investment parameter is ten years or more, a two bedroom property is a preferable investment option.

[ Blogger note: If our investment parameter is between five and ten years, does this suggest that we are stuck in limbo? ]

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