Should I buy a new or established investment property is a question that comes up a lot. An investment property is a tried-and-tested way to grow your wealth. However, it also involves a fair amount of research and decision making before taking the plunge.
One of the questions investors need to ask is if they are going to invest in a brand-new or off-the-plan apartment. Or, alternatively, buy an older property that perhaps requires some work.
There are pros and cons to both approaches. Read on to get a clearer picture of what these are, and check out our other posts on the key features of a good investment property, along with the many tax benefits.
The benefits of buying a new investment property
Australia has seen a boom in recent years in new apartment developments – and in some cases an oversupply. This doesn’t mean that a brand-new apartment isn’t a good buy. In many cases, these developments have been designed with modern life in mind. They are also typically high quality throughout, making them very appealing to tenants. Plus they are brand new, so there is no immediate work to be done.
Newer buildings also come with a tax benefit. You can claim depreciation on your property’s structure for every year if your property was built after July 1985, for 40 years. Amounts vary depending on the purchase price, but savvy investors will always factor depreciation in when selecting a property. All you need to do is have a quantity surveyor prepare a depreciation schedule to submit to the ATO.
For all properties, including ones built before 1985, you can also claim depreciation on fixtures, such as air-conditioners. While not as significant, this is still a worthwhile deduction. Plus, you can claim depreciation on renovations over a period of time. And even better, the cost of a quantity surveyor is yet another tax deduction.
The benefits of buying off the plan
Buying off the plan is another option for investors. And while it does come with some risk, there are also many benefits. For example, your stamp duty may be lower if the property’s value is lower at the time of purchase than when it is complete. Plus, developers will frequently offer a first release of off-the-plan apartments at a lower price. This is because they are keen to lock in funding so they can start building.
Another benefit of buying brand new or off-the-plan is that updated building regulations will require your builders to install the latest energy efficient appliances. And while there have been some problems with off-the-plan apartments in the past, stricter rules for developers have now been brought in. This should mean that buildings are now of a higher quality and more likely to meet expectations.
The benefits of buying an established investment property
If we are comparing like for like – so let’s say a 1990s two-bedroom apartment in inner Sydney with a brand-new one – one of the major benefits of buying the older property is obviously going to be its purchase price. This is particularly true if it’s a little run-down. Often, a tired rental can be secured for a much lower cost than a new build.
With fresh paint and flooring, you will end up with an appealing property at a lower price. You do, however, have to factor in the hassle of renovations and the cost of an untenanted property while you work on it. However, it’s a smart option for many buyers. Just be sure to buy in a good location and ensure the property requires no significant work.
Talk to us about buying a new or established investment property
We know inner city Sydney well, and have a good idea of new or established property coming on to the market. Please give us a call if you are thinking of investing. We will talk you through what we have available now.