It’s a common question that’s hotly debated amongst experienced investors – and may be confusing for new investors.
Today I want to share with you my thoughts on this topic from my 2 decades of education and insights gained from my experiences buying property myself – and for others. I’ve bought new properties and renovated old properties, here in Australia and overseas.
Buying new investment properties
Pros of buying a new investment property
A common reason many investors buy new investment properties is for cash flow and tax savings. Newer properties draw in tenants like Zooper Doopers to kids, so you’re likely to get higher rentals with low vacancy rates. Not to mention the tax incentives – you can get depreciation allowances for fixtures and fittings. And the average investor could claim 70-80% back in tax expenses.
New home investors like that they can plan their costs which helps them manage cash flow. They know there’ll be no unexpected maintenance since builder and appliance warranties have them covered. You only need to pay stamp duty on the land part of your purchase.
New properties are easy. Low risk. And avoids the potential ickiness that could come with buying old properties.
Cons of buying a new investment property
There’s a tradeoff for anything easy and low-risk. For new homes, that tradeoff is purchased price and value. You see, developers expect to make a profit, and new properties need to be marketed – and where do you think they recoup those costs?
Yes. In the price of the new property. Which confuses the true price of your property. But they can do it because it’s new and there’s no established value to refer to – to rely on. This leads into the risk associated with new properties: what is their real value?
It’s fickle. When there’s an influx of new property, say in a new housing estate, a new property’s value may be diluted. How do you make an informed decision when there’s no historical data? Also, new properties are more sensitive to the market: when the market slows, a new property’s rate of growth slows and loses value.
Buying old (established) investment properties
Pros of buying old investment properties
By far the best part of buying an old property is for the opportunities you don’t get with new property. The opportunity to get great deals. And the opportunity to add value.
You see, from my experience, I’ve discovered sellers sell for a reason you can always negotiate to your advantage. Add to that, because it’s an old house, you know what it’s worth – and can enjoy capital growth as soon as you buy. Not 7, 10, or 15 years later as with new properties. You enjoy capital growth immediately when you get a great deal on old houses – when you buy well at – or below – market value.
So you make money as soon as you buy. Then, on top of that, you’ve got the opportunity to renovate, subdivide, or extend. These will supercharge the value of your property. What that means is you multiply your returns and fast track your wealth.
All this more than outweighs the tax benefits you don’t get from an old property.
There’s the potential problem of buying a lemon you continually need to fix up. But that’s where the plan for refurbishments – and having an incredible building inspector – can save you. What’s more, you of course need to buy an old property that ticks all the boxes to give you strong capital growth.
For instance, you may find a great investment buying an old home in a great, established area with people who earn well. Live in gorgeous, solidly built period homes. And enjoy plenty of quality amenities and infrastructure. Where the land value is worth far more than the physical house…
My experience has shown buying a well-selected old house is the way to profitable investing and faster wealth.
Cons of buying old investment properties
Old homes can feel like a boat leaking water when it comes to maintenance. The key is to make sure the home is structurally sound before settling which can easily be checked with a professional building survey.
Lower rental rates are common because people love shiny and new – which is what they’ll get after an old place is revived, and so much more. If you’ve ever seen a period home renovated in a well-to-do area, you’ll understand how much character, appeal, and prestige comes with living in one.
Then as mentioned, the taxman doesn’t give out depreciation allowances for old properties – but the savings you get from negotiating a great deal outright and the boost in value you get from renovating can pretty much cover – and most likely soar above the tax benefits you can get from a new property.
There are pros and cons to new and old properties. However, my experience and expertise has allowed me to consistently find huge bargains on old houses in great areas. This has helped my family – and my clients – boost the value of their properties, and fast track their wealth. And you can profit as soon as the purchase is made.
Want to multiply your returns and fast track your wealth?
At Buyers Agency Australia, we know property investing can be daunting – especially if you’re not working in the industry, day in and day out. It can be costly and scary to know what to do, and who has your back.
That’s why here at Buyers Agency Australia, we have you covered.
Contact us for your free, no-obligation, 30 minute consultation.