If there’s one topic property investors are unlikely to ever agree on, it’s what makes a better investment opportunity: established or new?
Advocates of buying ‘established’ argue that established dwellings are often more affordable and could be improved to generate equity, where those buying ‘new’ argue that the tax incentives new properties deliver outperforms the potential equity gains for established properties.
Here are some reasonings for either side of the argument, but regardless of your opinion there’s no ‘right or wrong’ answer.
Reasons property investors buy ‘New’
Tax Incentives: 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 cost. This includes depreciating the assets in the building 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 Overheads: Unlike new homes that need little maintenance, owners of second-hand properties are often faced with immediate maintenance issues. The costs of repair in older homes can greatly inflate ongoing expenses.
Builders Warranty: As a purchaser of a new property, home warranty insurance protects you for several years against major building defects, which all builders of new homes in Australia must carry.
Reasons why property investors buy ‘Established’
Equity: There is little opportunity to add value to a new home, as opposed to the investment made in an established home can grow in the future should you choose to renovate or extend.
Cost-Effective: 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.
Particular Appeal: Older homes often have great features that can’t be replicated in new homes. For example a well-maintained period style home will reap rewards in capital growth down the track.
Known 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.
Established and new properties both have specific, unique advantages and what counts for property investors is that your decision matches your personal strategy and goals.