The Benefits of Purchasing an Investment Property vs Building an Investment Property?

This question plagues the Property Investment landscape for many. In a similar response, I would suggest both forms of asset can benefit different sectors of the economy.

Typical arguments for “Older” properties include:

• Proven re-sale values;
• Renovation opportunities;
• Potential to subdivide; and
• Possible greater land component

 

For me though, these potential positives are for those with plenty of time on their hands and who are willing to get their hands dirty. Unfortunately, most of us are not like that. “New” property has a myriad of benefits over “Existing” property, and these include:

 

1. Tax Depreciation | The Government will give you some of your tax back if you buy a new investment property. One new investment property ($500K) can give you $449,143 of tax deductions in the next 10 years.

2. Low Maintenance | New properties present low risk to the investor and a stable cashflow through no sudden surprises like hot water systems or leaking showers.

3. Home Owner Warranty Insurance | New homes have a 6 year structural building guarantee, exiting dwellings do not.

4. Growth corridor | New homes, located in new estates, typically are released in “Growth Corridors” – areas that the Government want more people in. This provides for more infrastructure, and increased growth.

5. Manufactured growth | Land developers always increase the cost of each new release, pulling up land values of prior releases.

6. Access to new infrastructure | New homes have “front line” access to new infrastructure from Government in growth corridors, thus making areas more attractive and thus having more demand.

7. Input into the design | Property Investors have the ability to provide input into the design, inclusions & finishes of their new property.

8. Rental Demand | Tenants prefer modern housing, with all the new amenities. With a greater preference, higher rentals can be charged and therefore better cashflow through less vacancy.

9. Better Quality Tenant | New properties attract a better-quality tenant due to increased demand. This results in higher rents and lower ware and tare. Premium tenants = premium rents.

10. Time Poor | New properties are typically completed “Turn-key”, where everything is completed by the Builder. This suits the typical 21st Century Property Investor.

11. Diverse Portfolio | Property Investors choosing “New” property can create a “Diverse” portfolio through mixing up their location and property type (i.e. townhouse, unit, house, duplex).

12. Stamp Duty | Through choosing to build a “New” Investment Property, significant savings on stamp duty can be achieved, as it’s charged only on the land, not the house and the land.

 

New Property for me is the only way to go.