New vs Old Investment Properties – The Pros and Cons

  • Posted 03 Nov
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New vs Old Investment Properties – The Pros and Cons

So you’ve decided that you’d like to start investing in properties. You’ve heard it’s a good long-term strategy to secure your retirement.

What you’re not sure on is whether you should buy brand new apartments off the plan, or whether you should look at existing houses or apartments.

The other thing your not sure on either is whether you should stick to buying within the city limits or whether buying out in the country would be a better option.

With all these questions mulling around, it can be difficult to get some definitive answers and make decisions.

Below are some pro’s and con’s for you to consider as you go through the process of choosing your next investment property.

Pro’s and Con’s of Investing in New vs Old Properties

Buying New – Pros

  • Tax deductions – you’ll be able to claim depreciation against a new property, including fittings and fixtures as well as capital works
  • Low maintenance requirements – the newer the property the less maintenance issues provided the property is properly tenanted
  • Builder warranty – if any issues do arise, the property is covered by the builder’s warranty or insurance
  • High rental returns – the newer a property is, the higher the rental returns are likely to be

Buying New – Cons

  • Higher purchase price – brand new apartments will likely command a higher purchase price, particularly if the developer is pre-selling the properties
  • Slow capital growth – you won’t necessarily realise capital growth for a while due to the initial high cost of purchase
  • No value add-ons – it’s difficult to add value to a new build, particularly in the beginning, so no ability to increase the value of the property
  • Oversupply risk – if there is oversupply in the area your new apartment is located, you could see a drop in value that could see it being worth less than what you paid for it

Buying Old – Pros

  • Less price fluctuation – because the property is well established, you’re less likely to see massive price changes in the same area
  • Value add-ons – you can add value through renovations or improvements which are also tax deductible
  • Affordability – older properties are generally more affordable to purchase, making them ideal for beginner investors

Buying Old – Cons

  • Higher maintenance costs – with older properties, you can expect to be paying for regular maintenance costs on an ongoing basis
  • Loss of rental income – if you do decide to carry out renovations, then you may lose rental income during this time
  • Lower rental returns – if the property is old or run-down, you won’t see the same rental returns you would with a newer property
  • Tax benefits lower – depreciation will be lower because the property is older, so tax breaks will be less

As you can see, there is no hard and fast rule when it comes to investing. Choosing what to buy really depends on your long-term goals.

If you need help with deciding what to do when it comes to investing in property, talk to one of our qualified staff today.

 

 

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