New build vs existing old – which makes the better investment property?

One question we frequently are asked is what is best for investment purposes, a new build or older, existing property?

Well, it depends……..

As with property, or any investment for that matter, there are a lot of variables and there are several facts to consider personal to your situation – your budget being one of them and your property investment strategy being another.

For instance, if long-term capital growth is your strategy, records indicate older properties in a good suburb often give better long-term capital growth than a new unit in a less desirable suburb. However, records also show the opposite – a new property in a desirable suburb can give better capital growth than an older property in a less desirable suburb.

So, what else should you consider?

New property

Pros

  • There are still some tax deductible depreciation allowances on new-builds (check with your financial specialist)
  • Generally, they are low maintenance, so there are fewer upkeep costs (and less hassle!)
  • Often has low energy ratings, making it cheaper to run and hence more attractive to tenants
  • Frequently comes with a builder warranty
  • May attract a higher rental return

Cons

  • In a depressed market, it may be more likely to lose value
  • Can be small, lack storage space and be badly designed
  • Many apartment and unit complexes have rules and regulations which tenants find unattractive
  • May take longer to attract capital growth
  • Strata or other body corporate levies can be high which, although they are tax deductible, will affect cash flow

Old property

Pros

  • There may be scope to renovate and add more value to the property
  • There are a lot of tenants who prefer living in older properties to new-builds because they are full of character
  • You may well get more bang for your buck because you aren’t having to pay for developer costs and you’ve got more negotiation potential
  • Often holds its value in a depressed market
  • There is historical data of how the property has performed both as a rental, and as its value

Cons

  • Often incur more maintenance costs
  • Frequently has low energy ratings, making it more expensive to run and potentially off-putting for potential tenants
  • Fewer depreciation tax benefits
  • Rental returns maybe lower if the property is out-dated or needs work
  • Loss of rental income if the property needs major works or improvements

Ultimately, regardless of whether it is an old or new property, it boils down to the ticked boxes of what makes a good investment; namely the location, access to local amenities, public transport, schools, and, in many cases, access to parking facilities.

As an aside, whether you are looking at buying an established or new property, it’s worth noting, you may be eligible for a grant if you are a first home buyer and intend to live in the property for a period of time before you turn it into an investment – visit www.revenue.nsw.gov.au to find out more.

If you want to know more about investing in property and what to look for, come on in to our Cardiff office for a chat or give us a call on 02 4956 9777.

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