investment unit

1 vs 2 Bedroom Units – Which Are Better Property Investments?

With talk of interest rates coming down in the second half of 2024 more investors will come back into the Sydney property market. Lower interest rates combined with strong rental demand, low vacancy rates and high rents will make it appealing for property investors. So it seems timely to look at one- and two-bedroom units and see which stack up better as a property investment.

When buying an investment unit, it is important to purchase a property that provides a balance of capital growth and a good rental yield. There is an inverse relationship between capital growth and rental yield and the properties with the highest rental yields (think 5%+) are often in areas with lower capital growth. As buyers’ agents we consider the potential for long-term capital growth to be the most important factor when buying an investment property.

It’s important to acknowledge that budget considerations play a pivotal role in choosing between a one- or two-bedroom unit. If budget is not an issue, I prefer a two bedroom unit in a good location rather than a one bedroom unit. However, if budget is a factor I would purchase a one bedroom unit in a better location rather than a two bedroom unit in a less good location.

For more detailed information about the type of investment units we like to purchase, check out about our Top 10 Things To Look For In An Investment Unit article. 

Once the purchase price is taken into account, here are the other factors to consider:

One Bedroom Unit Benefits:Two Bedroom Unit Benefits:
Higher gross rental yield, typically ranging from 3%- 4% (in Sydney)Higher capital growth potential due to the larger property size and greater financial investment
Independence – no need for a roommateMore choice as a greater supply of two bedroom units than one bedroom units.
Opportunity to buy in a higher-quality suburb 
Lower overall expenses and outgoings due to the smaller unit size
One Bedroom Unit Negatives:Two Bedroom Unit Negatives:
Capital gain not as good as 2 bedroom due to the unit’s smaller size May need a roommate or subletting the second bedroom 
Increased wear and tear if you have a roommate or sublet the second bedroom
Slightly lower rental yield due to the larger financial outlay

Lastly, the right team of professionals on your side can make all the difference in securing the right property at the best price. Make sure you have a great buyers’ agent, finance broker and conveyancer / lawyer on your team. And post-purchase, a quantity surveyor provides a depreciation schedule for your tax deductions.