In todays blog
we're gonna have a look at why invest in a new property as opposed to an older property.
Well, there's no definite right or wrong answer
and it really depends on the investors skill set, time and money.
Now if you don't ever see yourself taking six months off work
putting on a hard-hat, fluoro vest,
then becoming a DIY renovator is probably not for you;
however if you're the type of person who wants the minimum of fuss & bother
and just want everything done for you and you want a reliable cash flow
then a new property will probably tick a lot of your boxes.
So, here's some of the reasons why a lot of investors go
towards buying a new property as opposed to old.
So, the first one is the quality of the construction.
Now providing, of course, you use a reputable builder
you're gonna be getting the latest in design and building technology.
And not only just that but you're also going to be getting the blueprints
like the x-ray, of the house construction. The plumbing drawings, electrical drawings,
engineering drawings. Now all these things could come in very handy
years down the track. That's the first thing.
Secondly - structural guarantees & warranties. Now, unlike an old property where you really don't know
about the 'bones' of the property, with a new property there's far more accountability today.
Engineering guarantees - they warrant the structural integrity for up to 40 years.
Extended defect warranty periods, and that keeps the builder on his toes
and, of course, the appliances also come with extended consumer warranties.
Again all these things that you don't really pick up on old property.
Now, all this means, if there are any problems down the line
it all could be shunted back to the the person or the company or the supplier
responsible and even if they are no longer around you can always make
a claim on their professional insurance policies.
Then there's specifications. Now, we all know we can go to Bunnings
and virtually fit out and build a house. You can buy the bath, the sink, the kitchen.
You name it, Bunnings will sell it - they sell it all!
Now, as you also know is that when you buy stuff from Bunnings
you're buying things in a very limited budget - basically
the cheapest money can buy - imported from across the world from
from low cost providers - but the question is, is that really what you want in an investment property?
A long term investment property? It doesn't really make sense to cut any corners
at this point. So, just be careful here though that there
if you're buying a new property from somebody
perhaps somebody that's just been building a spec property
that could have also be built on the cheap and they've only bought it just to
flick it on and you really don't get good visibility of what you're buying, so a little caveat there.
Now, if you're building a house
from scratch you can get involved and specify the quality,
the brands that are gonna be used,
so you can do all that and that alone gives you some peace of mind knowing
that you've got the good stuff going in there.
The fourth area of consideration is lower maintenance cost
now the older the property then clearly the more it's gonna cost you to run.
Now this also comes back to my previous point that if the property was built on the cheap
many years ago, and there's a lot of things that are going to need repair or replacement -
no different really from buying an older second hand car -
you don't really know what you're getting... hot water systems, faulty plumbing, leaking roofs...
all those things are all very expensive to fix.
Now, with the new property, however, it's a little bit like buying a new car;
There's minimal maintenance. That means you can pretty well do
accurate cash flow budgets, and for many people that's really important wanting to know
exactly what
they need to put into the property. With an older property it's a bit of an
unknown.
With a brand new property you can pretty accurately forecast, for years ahead,
what the maintenance and repairs will be.
Another factor is popularity. A new, modern home is particularly popular with tenants.
It simply looks great; there's more demand for it;
particularly for houses that meet the energy efficiency ratings
which means the tenants are going to spend less money on their power bills
and their water bills and that's also very attractive to them today.
This all means that you're gonna get a higher and more consistent rent
and property managers, they just love new properties for all these reasons;
it's a minimum of fuss and bother from them.
Tax considerations are also an important part and one of the great things about
investing in a new property is
their very generous tax benefits and that can really add to your cash flow.
You can depreciate all the fixtures and fittings and also claim a building allowance.
Those two alone can put more money back in your pocket
and simply the more tax that you pay, the more tax that you can save
when you're investing in a new property and that all means that your
weekly contribution to the property is absolutely minimised
because you're not only getting your rent but you're also getting big
tax savings on the government each month,
that's a big plus too. So in summary:
a new property means that you don't have to lift a finger, it's all done for you,
it's cheaper to run, much easier to manage,
and gets a higher rent; plus it's backed up by warranties and guarantees
so gives you peace of mind and better tax deductions.
So buying an old property vs a new property is just one
of many important considerations when investing in real estate.
Location. The timing of the market.
The price point to be in the market. The supply and demand. There are a number
of key issues which will all have an impact
on the overall effect of your investment.
So, before you go out and invest in any property we strongly recommend,
Why not come and have a chat to us, let's have a look at your situation
and we can work with you to help you find the right property
under the right circumstances to suit your individual circumstances.
And if you'd like more information on the pros and the cons
of investing in a old vs a new property
then just grab the download