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How buying real estate usually works
Spaceship finds that most houses have at least a little garden. It also notes that apartment buildings have common walls, and that in many cases the basic maintenance tasks are looked after by strata management.
Spaceship lists several ways into property, from buying a share of one home through to buying an apartment, a house or a piece of land. It also describes funds that track an index of publicly traded property companies, and Australian real estate investment funds that own income-producing property. The company's own suggestion is that anyone weighing up a property investment take independent financial and legal advice first. That is its recommendation, not a rule.
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Buying with someone else
Buying with someone else is one option Spaceship describes for people who have some money but not enough to buy an apartment or house alone. It lists the questions it raises for that route: what happens if one person cannot keep up the payments, what happens if one wants to sell and the other does not, what happens if one wants to renovate, and what happens if one wants to live in the property. The company also notes the distinction between holding as joint tenants and holding as tenants in common.
Spaceship explains that in Australia, when two or more people hold an interest in a property, the title record sets out whether they are joint tenants or tenants in common. Tenants in common each hold a declared share. Joint tenants hold the property under survivorship rules, so when one dies their share passes to the other, even if a will leaves everything to somebody else. The company says most couples choose joint tenancy.
Spaceship finds that most houses have at least a little garden.
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Apartments, houses and land
Spaceship finds an apartment is generally cheaper than a house, depending on where and when it is bought. It lists the trade-offs of apartment living: the shared chores are in many cases handled by strata management, which suits a building with a pool or garden, and many blocks are secure. Against that, walls are shared with neighbours, noise can carry, and owners generally pay strata or owners corporation fees, with a possible contribution to a maintenance fund for shared costs and bills such as water.
A house, the same company finds, offers more room, a garden, and the chance to add rooms or a floor later. The owner is not answerable to strata management, though renovations may be subject to council or building regulations. A house also tends to be more private, the company finds. The company also finds that the owner usually has a good idea of who comes and goes. Land is another option it describes: space, quiet and wildlife, but with the cost and time of keeping up boundary fences, the threat of snakes and bushfires, the isolation if something goes wrong, and the possibility of no internet coverage.
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Funds that hold property
Not every way into property involves holding physical property. Spaceship describes real estate-focused ETFs that track an index of publicly traded property companies, and Australian real estate investment funds, where money from many investors sits in a trust that owns income-producing property. The trust is generally listed on the Australian stock exchange, and the income is normally rent. Buying into one is a way to hold property without the daily work of being a landlord, and the company finds it can also be a quick way to spread an investment across more than one asset.
NerdWallet also lists ways to invest in real estate. Real estate investment trusts, it explains, are companies that own commercial property such as offices, retail spaces, apartments and hotels, and they take their income from rent. A share in one works much like a share in a stock or a fund, and the buyer holds a stake in the property without owning any of it.
Questions
- How does buying real estate work?
- There is more than one route. A buyer can take on a house, an apartment or a piece of land, buy with someone else, or put money into a fund that owns property instead.
- What is the difference between joint tenants and tenants in common?
- Spaceship explains that in Australia the title record sets out whether the owners hold as joint tenants or as tenants in common. Tenants in common each hold a declared share, while joint tenants hold the property under survivorship rules, so a share passes to the other owner when one dies even if a will says otherwise.
- Is an apartment cheaper than a house?
- Spaceship finds an apartment is generally cheaper than a house, depending on where and when it is bought. It also notes that apartment owners generally pay strata or owners corporation fees.
- What is a real estate investment trust?
- NerdWallet describes real estate investment trusts as companies that own commercial property, including offices, retail spaces, apartments and hotels, and earn income from rent. A share in one works much like a share in a stock or a fund.