Investing in Apartments vs Plots: Pros and Cons

IN THIS POST

Pros of Investing in Apartments
Cons of Investing in Apartments
Pros of Investing in Plots
Cons of Investing in Plots

Buying plots in a reputable housing society is often considered one of the best investment opportunities in Pakistan. However, have you ever considered whether purchasing an apartment could be a better choice for you? If you are looking to generate a second stream of income or plan to diversify your investment portfolio, investing in apartments can be a wise decision. However, if you are confused about buying apartments vs plots, here is a comprehensive guide to help you out.

Pros of Investing in Apartments

The growing demand for affordable housing and the scarcity of land has left developers in metropolitan cities with no choice but to expand upwards. As a result, a number of vertical developments have surfaced in almost every big city across the city, providing genuine buyers and real estate investors with an opportunity to earn impressive capital gains in short to medium terms.

Buying an apartment can be an excellent investment if you do it right. To help you make a well-informed decision, we have listed down the pros of investing in apartments.

A Great Way to Earn Passive Income

It’s no secret that rental properties can be a strong source of income. So, if you want to make extra money from your property in Pakistan, investing in apartments could be the first step to setting up a reliable income stream. Since residential units in well-maintained apartment complexes are always in high demand, the homeowners can use their property to establish a positive cash flow that is generally higher than stock returns. It is also worth mentioning that investing in stocks does not guarantee a high ROI, whereas renting out an apartment ensures a monthly income that you can either save or invest.

You can also take a look at our guide on different types of rental properties in Pakistan for more information.

Value Appreciation

If you are a real estate investment novice, you may have heard that houses and apartments tend to depreciate over time while the plots become more expensive. While this statement can be true in certain scenarios, it is important to point out that the value of apartments in Pakistan also increases with time – especially if it is located in a newly developed area.

Usually, apartments located in suburban areas are relatively less expensive than those situated in the city centres. However, as cities continue to grow and expand outwards, these vertical developments also witness a price hike. In other words, if your apartment is located in a highly coveted neighbourhood, its value can increase manifold in the coming years. Just make sure to keep it clean and well-maintained.

Expand Your Portfolio

Buying apartments could be a great decision for investors looking to expand their portfolio of rental properties. When it comes to the major difference between apartments vs plots, please note that a parcel of land is not likely going to help you generate a second stream of income despite being a good addition to your investment portfolio. Meanwhile, investing in apartments checks both boxes.

In addition, managing a residential unit in a vertical development is relatively easy. Most new apartment complexes also employ an external management company to look after the maintenance and repairs of the building.

High Demand in Market

The real estate market in Pakistan is evolving at a rapid pace. Large detached homes are quickly being replaced by tall residential towers featuring multiple apartments with top-notch amenities. Moreover, with houses becoming much more expensive over the past years, young homebuyers have turned their attention toward modern apartment complexes on the outskirts of the city.

Another reason investing in apartments is set to provide better results than most other assets is that more families are choosing to rent now than ever before. Furthermore, apartment living has gained immense popularity among millennials because these units are relatively less expensive than traditional houses as well as more secure.

For more information, please feel free to check out the top reasons for buying apartments in Pakistan.

Cons of Investing in Apartments

cons of buying apartments — The property value of an apartment may decrease overtime

While buying flats can be a lucrative investment option, this type of property may come with a few drawbacks. Since we are committed to providing you with a full picture, here are some of the most notable cons of investing in apartments.

Costs More Money

Buying an apartment is not exactly cheap. In fact, acquiring one can be a huge financial decision for most people, which means one has to be extra careful while making the investment and meticulously undertake the due diligence for their peace of mind.

Compared to apartments, buying plots is usually cheaper. Even if you decide to rent out the space, it may take quite a while before you are able to recover your initial investment. In addition, other forms of investment, such as mutual funds and stocks, can also be made with relatively low amounts.

Cannot be Liquidated Overnight

One of the biggest cons of investing in apartments is its lack of liquidity. If you ever need money in a pinch, selling your property quickly can become a bit of a problem. Depending on the location and condition of the structure, your flat can stay on the market for months before being purchased. In worst-case scenarios, you may even have to sell your property for a lower value than you had planned.

On the other hand, selling and transferring a plot takes much less time.

Value May Depreciate

When it comes to buying apartments vs plots, the most common argument is that constructed structures don’t appreciate as much as land. As mentioned above, this may not stand true in all situations. However, property owners may face this dilemma if their apartment is in a bad shape. Buyers are likely to expect a lower price for flats with water damage, mould infestation, exposed electrical wiring, damaged flooring, and outdated floor plans.

That being said, you can always turn things around by following our checklist of how to prepare your property for a tenant.

Pros of Investing in Plots

Investing in plots has always been considered a profitable venture. Here are the main advantages of buying a parcel of land in Pakistan.

Secure Investment

The sharp increase in urbanisation has resulted in a higher demand for real estate as well. Investors and genuine buyers are on a constant lookout for residential and commercial plots in new gated communities and developing housing societies.

Another factor that makes plots a popular investment option in Pakistan is that it rarely depreciates. Though the selling price of land depends largely on its location and investment prospects of the residential scheme, investing in this type of property guarantees maximum capital gains in the long term.

To learn more, take a look at the factors that can significantly impact the value of plots in Pakistan.

Allows More Flexibility

Plots are not only a low-risk investment but they also allow property owners an opportunity to construct a house as per their requirements, whereas most apartments do not offer extensive customization options. So, if you want to construct a house with a contemporary layout and premium features, you will be at liberty to choose the design elements that strike your fancy.

On the other hand, if you own a commercial property, you can construct a structure at your convenience and eventually rent it out to generate passive income.

Relatively Less Expensive

Buying plots is usually less expensive than buying an apartment of the same area size. Therefore, if you are looking for investment opportunities that don’t put a dent in your bank account, you may want to consider opting for a plot in a developing neighbourhood away from the hustle and bustle of the city. Similarly, you can construct your dream home on that plot at your own pace whenever you want, which is bound to make the entire process much less stressful.

Can Be Used for a Variety of Purposes

People generally buy plots to build houses. However, if you don’t plan on constructing one right away, you can easily use the land to host different types of events and activities. From barbecue parties and sports days to weddings and summer camps, you can utilise your plot for a variety of purposes.

However, before you decide to use the space to organise an event, please make sure to take a look at the bylaws of your housing society to ensure you won’t be violating any rules and regulations.

Cons of Investing in Plots

Since there are some drawbacks to every type of investment, here are the most prominent cons of investing in plots that all prospective buyers must know about.

No Revenue Generation

Unless you are renting out your plot for different events and activities or plan to carry out construction on an urgent basis, your property won’t generate any income for the foreseeable future. Unlike apartments and houses, which can be rented out for extended periods, plots just sit there without making any money at all.

Cost of Construction

Another major con of investing in plots is the cost of construction. With the surge in inflation, the prices of building materials have also skyrocketed. Hence, if you were to buy a plot, you must also get ready to finance the construction of a house. For this purpose, you will have to look for an architect to develop the plans and hire a contractor to build the structure.

If you are apprehensive about choosing the right construction company to build your house, here are the 10 important questions you should ask before hiring a contractor.

Lack of Payment Facilities

Most banks and financial institutions offer home loans and other financing options for apartments and houses. However, when it comes to buying plots in Pakistan, you will probably have a hard time finding an institution willing to loan you the required amount.

To conclude, the decision to invest in apartments vs plots varies largely with each investor. If you are looking for long-term capital gains, buying a plot may be the right choice for you. On the other hand, if you are planning to earn passive income through your property, buying an apartment could be a much more lucrative option.

This brings us to the end of our guide on investing in apartments vs plots. If you have any questions about the topic or want to share your feedback, please feel free to do so by dropping an email at blog@zameen.com.

Moreover, you may want to check out the following guides for more insights on property investment in Pakistan.

Stay connected to Zameen Blog to learn more about the latest investment opportunities in Pakistan. Furthermore, you can also visit our Facebook page to find out all about the upcoming Property Sales Events in your city.

Apartments vs Plots: Which One is a Better Investment?