If there’s one topic property investors rarely agree on, it’s what makes a better investment: old or new?
Proponents of buying ‘old’ argue that established dwellings are typically more affordable and can be renovated to create equity, whereas those buying ‘new’ argue that this is outperformed by the tax incentives that new properties deliver.
Confused? Here are the arguments for both sides of the debate, but remember there’s no ‘right or wrong’ answer, regardless of which corner you stand in! Old and new properties both have distinct, unique advantages and what counts as an investor is that your decision matches your individual strategy and goals.
Reasons to buy ‘New’
Tax depreciation: If you’re an investor, one of the big advantages of buying a newly constructed property is that you can claim depreciation as a tax-deductible expense. This includes the depreciation of assets in the buildings and the cost of the building itself, as well as for wear and tear on fixtures and fittings in the property. The newer the property, the higher the level of depreciation.
Better quality tenant: Brand new properties tend to attract a better quality tenant, which means a higher rental income and fewer headaches for the landlord!
Less maintenance: Unlike new homes that require little maintenance, owners of second-hand properties are often faced with immediate maintenance issues. The costs of repair in older homes can significantly inflate ongoing expenses.
Warranty: As a purchaser of a new property you are protected for a number of years against major building defects by home warranty insurance, which all builders of new homes in Australia are required to carry.
Reasons to buy ‘Old’
Equity: There is little opportunity to add value to a new home, whereas the investment made in an old home can grow in the future should you choose to renovate or extend.
Affordable: It’s often said that you get more house for less dollars buying a second-hand home than when buying a new one. For entry-level investors, old properties can have the advantage of an affordable price tag.
Unique appeal: Older homes often have great features that can’t be replicated in new homes. A well-maintained period-style home, for example, will reap rewards in capital growth down the track.
Established sales history: There’s less guesswork in buying an established property because you’ll be able to trace back the property’s appreciation and find out how the suburb has performed. This can help give you the assurance you need that you’re buying a good property.
If you would like to contact one of our advisers and make a loan/financial planning enquiry, please contact our office on (02) 8065 3318 or info@financialgenius.net.au