Investment Property Decisions: Old vs New
That’s the question that property investors across our country are always trying to answer. What’s the smartest and most financially advantageous way to go with property investment? Should you invest in older properties where the value can be increased with renovations and/or extensions, or is new property the way to go because of the higher tax incentives?
It’s only a dilemma because there are pros and cons with both methods, and of course there’s no right or wrong answer – it depends entirely on the goals and strategies of each investor.
Here are some tips that may just sway you when determining whether your next real estate purchase should be a brand new property or an already established property.
New Property Offers Higher Dividends
- Depreciation: With an investment property you can claim depreciation on all eligible plant at the property: the newer the property, the higher depreciation level. All of the appliances such as air-conditioners, dishwashers, heaters and so on, and including carpet floor coverings have high depreciation rates. Each property is unique and has different depreciation rates, dependent upon the size and the inclusions, however new and renovated properties have the highest depreciation rates and therefore new property ownership can provide sizeable tax benefits for the owner.
- Appealing to Tenants: Many tenants are looking for quality new homes, especially in coastal and city locations, so it’s quite common to find a tenant prior to the completion of the home.
- Statutory Warranty By Law: In Australia, builders of new homes must carry statutory Home Warranty insurance. In the event of a serious building defect the purchaser of the home is protected for a number of years. If you should be unfortunate enough to find yourself in such a situation and your builder fails to make restitution, you can make a claim against the Home Warranty insurance.
Sometimes ‘Old is Gold’
- Equity Adding: If you’re considering purchasing an established older property, do your research and determine what the land and building costs are in this particular area, then assess this against the asking price for the property. You need to know that by buying an older home, the renovating or extending of the home will greatly increase the equity in the property. Renovating is achievable much quicker than rebuilding, and as long as you’ve done your homework you can add a sizable amount of equity.
- Hidden Appeal: Some older-style homes have wonderful features that we don’t get to see in modern-day homes, such as beautiful flooring, hidden underneath carpet. When you’re doing your research, don’t forget to ask lots of questions as to the history of the property – you never know what you might discover.
- Established Locations: Lots of the older suburbs are well and truly established with their own special charm and appeal – something that can never be replicated in newer developments. There is always going to be a demand by both tenants and owner-occupiers for homes in these well-established, and sometimes very upmarket, areas. When buying in these kinds of suburbs you know that your investment is safe.
Before Taking the Final Step
When you’re ready to make your property purchase, regardless of whether you’ve decided to go old or new, ensure you’ve done your homework and that you’re fully informed. Some classified real estate websites contain built in area and price information. Speak to many real estate agents, particular from the area you’re looking at: some agents have worked in their own areas for many years and can offer lots of helpful information.
Choose the right Investment Property that suits your situation
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