Brand new homes deliver benefits from depreciation to capital growth potential but older homes have the capital growth history to back them up.
So which is the better investment? Here are some Pros and Cons from RealRenta to help you make your own mind up:
Established Properties Pros:
- No limit to location, you can buy established properties anywhere
- Existing homes generally sell for less than brand new and you may be able to buy under market value
- You can manufacture growth through improvements & additions
Established Properties Cons:
- Hidden defects and structural problems can be very costly and can cause huge problems down the track.
- Renovations can be very costly and blow out of proportion to your original budget and then there is the issue of council approval.
- Depreciation on existing properties is lower than new properties and this can impact cash flow.
New Properties/Off The Plan Pros:
- Depreciation is at a maximum for brand new properties
- New properties have all the high tech gadgets that appeal to the younger generations
- New properties need less maintenance and repair and often are still covered by the builders warranty
- Deposits for off the plan properties can be considerably lower than other properties.
New Properties/Off The Plan Cons:
- New estates and subdivisions are generally not close to city centres
- Demographics of these locations mean that they appeal to young families who are interest rate sensitive
- These areas tend to have lower capital growth
- Then there is GST, developers profit margin and marketing costs
- Quality of new homes can be lower ( the motivation for profit means substandard materials and labour etc)
- When rental agreements terminate, the yield may no longer work in your favour
- Off the plan properties typically attract a premium price
- If the market takes a downturn during construction, off the plan properties may be worth less than what you paid for.
- You may need to lower your rent in a new development, if there is a large volume of properties that come onto the market at the same time.
For more helpful blogs from RealRenta, visit: http://info.realrenta.com.au/blog
