Do you remember buying your first car?
Weren’t you confused about whether to buy a new one or an old refurbished one? Surely, every now and then, you would weigh down each and every option for both cases so that you could reap the maximum perks no matter what is chosen.
Similarly, now that you are planning to buy a property, you are once again standing at the same crossroads. You are facing the same dilemma as you did while buying your car. The only difference is that buying a house is a lifetime investment plan.
Why are you buying a home
The kind of property that we buy depends on the situation that we are in, our investment goals, the stage or level that we are in, in our property investment journey.
Ask yourself- “What type of an investor are you?”
Are you a newbie or an experienced investor? Do you like taking risks and searching for higher returns or risk averse? Are you after a long term or short term strategy? What type of a cash flow and tax deduction are you looking for?
Whether old or new, both types of properties have their up and downsides that need to be considered carefully. Not knowing these factors and not having a clear strategy is where many people miss out on financial investments and in some cases lose money.
This is why before taking the final plunge and investing everything that you have, it is highly essential to weigh the pros and cons of buying a new or old property. It is only after having done so that you will be able to decide what would suit you best. If possible it is also advisable to take financial expert advice in the process.
So, let us go ahead and check the pros and cons of a new house versus and the old one.
Choosing To Purchase Old Property
The truth is, people usually prefer buying older property because they are comparatively cheaper than the newer ones. However, we all know that when we are out to buy a house, we must consider more than just the purchase price. Let us analyze the pros and cons of buying an old property and see if it really is worth the deal.
To a homebuyer, it might seem that older homes have more potential for capital growth with a comparatively cheaper purchase price than newer homes. Newer homes are generally priced according to the present market valuation by developers, which is why the capital growth gets limited in the short term.
But then, we must also keep in mind the fact that an older property also comes along with maintenance and renovation costs. Additionally, an older property is hard to give out on rent and so we usually end up with lower rental returns and longer vacancy periods, which in turn affects cash flow.
This is one of the biggest drawbacks of purchasing an old property as there might be no or very limited tax depreciation on an established property. These factors too have a dramatic effect on the cash flow and investment return.
That is the reason why one should consider buying a new property instead of an established one if he/she wants to generate and maximise cash flow from the beginning of the purchase.
However, If you are still thinking of purchasing an old property, it is suggestible to ask a contractor or building inspector for assistance in determining the condition of the property in case there are any important issues that would require a large capital outlay.
Keep in mind that inspections need to be done before we even start talking about any payments so that unforeseen and costly surprises do not take place. When buying on auction, there is usually little or no time for inspections and sometimes inspections are not allowed at all.
If the later is the case, then the best thing to do, so that you can make a more well-informed bid is to drive by the property to see the area and the condition of the exterior instead.
Choosing To Purchase New Property
Often, investors and specialists prefer buying new property due to the promising savings, tax depreciation benefits, and added luxury that comes along with it. The larger amount of tax depreciation that is obtained from a newer property reduces investors’ holding costs.
Some of the other benefits of purchasing new properties are as follows:
- The maintenance costs are low.
- The energy rates are low which reduces any type of ongoing costs
- The amenities that come along with a new property are also new like new appliances and fixtures.
- Excellent capital growth potential in certain areas
When purchasing a new home, everything is already done for you, from the placement of a new floor and window coverings to a fresh coat of paint. All that you are left to do is to move in or find tenants to live there. However, even though new things do look shiny and attractive, they also come with disadvantages.
New properties come with signs of unpredictable growth. Apartment blocks in a recently zoned area could be in oversupply and potentially difficult to rent out. Stay aware of growth corridors because while investing you could be waiting a while for capital gains.
In the present market scenario, purchasing older properties might give more room to negotiate prices. Irrespective of that, it takes proper research and guided advice to ensure that you purchase the right property to suit your requirements.
Whether you are buying new or old property, do your homework well, scan the neighborhood to see whether it is doing good and growing or going the opposite way. Additionally, you should also enlist the help of professionals whenever necessary who can answer your questions anytime.
Over to you
When you are ready to invest in property, whether it’s old or new, ensure that you are fully informed. Many classified real estate websites have built in price and area information so, go ahead and speak to some local real estate agents who can offer a vast wealth of helpful information.
Buying a property is more about the selection of the right property and location, low maintenance cost and labour without hidden surprises, and that which possesses more opportunity for capital progress and rental yield potential.
Happy home buying to you.