New Vs. Old: What’s the smarter investment?

Unit block in Sydney

Buying an investment property can be a conflicting process if we let our emotions takeover. When we buy an owner occupied home, it’s easy to get swept up on the aesthetics and nice-to-have’s. However an investment property is a different kettle of fish. It must be approached logically and rationally to ensure that you’re making a smart long-term financial decision. Although you personally may wish to purchase a new property to live in, is that the wisest option for an investment property?

Benefits of buying old

There are a myriad of benefits to buying an older property, all of which will either help cash flow, capital growth or equity.

  • An older or established property offers the opportunity to add value to the existing structure, and therefore potentially increasing your equity in the property quite quickly. Whether it be a cosmetic makeover or a full overhaul, having the scope to improve on the existing property is a wise investment option for those willing to outlay construction costs to reap the rewards long-term.
  • A cosmetic makeover to your investment can also improve the rentability of the property and therefore the rental return.
    Dependant on the style of property, there is a potential to subdivide the property to allow for an additional income stream with a dual occupancy property, or granny flat.
  • Established properties are lovely to maintain their value or experience minimal fall during a slow marketing period, whereas newer properties are often more heavily affected by these movements and rely on the market solely to increase their value again (as there is no scope for renovation or upgrades.)

Benefits of buying new

Aside from the shiny newness of a fresh property, there are some significant wins for an investor purchasing a new property.

  • Many would argue the biggest benefit to purchasing a new property is the tax incentives. There is significant scope for depreciation which are a helpful way to minimise your tax. A new property allows you to claim on the building value including fittings and fixtures. The ATO will also provide a substantial refund if the property is positively geared.
  • The newer the property the more likely you are to attract buyers should and when the time arises to sell the property. The bones of the property including plumbing and electrical should still be in good condition easing a buyers mind for potential expenses upon purchase.
  • Along with more buyer interest, comes more interest from renters. If you have a new property, you’re likely to attract quality tenants who will pay decent rent and make rent payments on time.
  • Similarly to purchasing a new car, having a newer property does bring peace of mind that everything is in the best possible condition from the outset. Knowing the plumbing and electrical are new, the walls are freshly painted and the property presents well, is enough to ease an investor’s mind for years.

There are many pros and cons to purchasing either a new or older property. If you’re after wealth as a long-term solution, our advice would be to invest in an older property where there is larger scope for improvements. However like with any major investment purchase, it does depend on your individual circumstances and objectives. Seeking the help of trusted professionals will be able to guide you in the right direction.

Contact CPS Finance today to discuss the options available to you.

Leave a Reply

Your email address will not be published. Required fields are marked *