Which is the better investment: old or new property?
When purchasing an investment property, it’s important to identify the advantages of choosing a new property, versus an old property. Both options have their advantages and disadvantages; identifying which one is best for your portfolio is key, and will prove to be rewarding in the future. Ensuring you have a succinct property plan in place, which outlines your financial objectives will help throughout your purchasing decision.
Advantages of buying new
Less maintenance
A new property will naturally come with minimal maintenance needs. The building’s fixtures and fittings are all new, and likely to be less of a burden on your wallet.
Higher tax deductions
The Australian Tax Office allow owners to claim depreciation on a new building, appliances and fixtures. This creates a worthwhile tax offset for investors.
Lower vacancy rates
Newer properties tend to attract tenants willing to pay a premium and therefore are likely to have lower vacancy rates.
Peace of mind
When purchasing a new property you can be more confident that it will be compliant with current building codes, standards and techniques.
Advantages of buying old
Lower price point
Because the building, fixtures and fittings are not brand new, the price of the property may be more competitive than a new property.
Ability to increase value of the property
Older properties offer an opportunity for upgrades and renovations, meaning the investor can significantly increase the value of the property and ultimately higher capital gains.
More established
Often an older home will exist in a well established suburb with plenty of amenities; a positive for both buyers and tenants.
When deciding which way to invest, it’s also important to interrogate relevant data to see how the figures stack up over the long-term. Below provides a hypothetical analysis of buildings’ deductions over a one and five year period, as well as expected annual cash return. Completing a deduction assessment will provide true insight into the property’s financial performance and help with your budgeting and objective planning.
If you’re keen to understand more about the benefits of buying an older property versus a newer property, contact me today on 0404 471 376 to determine your objectives, and how best to achieve them.
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