Should You Buy An Old Or New Investment Property?
Dilleen Property Group 2022
Some investors have difficulty deciding whether to purchase old properties or new properties. Due to Division 43 for tax depreciation, old properties tend to refer to those that were built before the cut-off year 1987 and new properties refer to those that were built after that year. Both types of properties have their pros and cons so which type should you purchase? The answer is: It does not really matter.
Rather, these are the points you should focus on when purchasing property :
1. Buy as many properties as you can
When purchasing properties, you should always follow these golden criteria:
Buy under market value
Buy in metro areas with huge capital growth
Buy properties with a strong rental yield
By following these criteria, you will be able to mitigate many risks. You should aim to purchase properties with a gross yield of 5-9%, no matter how low or high the interest rates are, you will still at least be neutrally geared. The worst-case scenario will be going slightly negatively geared however new properties have tax depreciation to balance this out.
2. Start as early as you can
You should not let the media deter you from taking action. There is no perfect timing for property investment as you can never speculate what will happen in the future. It is best to buy properties whenever you have the capability to instead of waiting for 'the ‘right time.’ Property value and rent increase over-time, getting started early mean that you can allow more time for your property value and rent to increase.
3. Be open to the property’s age
You should aim to have a diversity of properties in your portfolio as properties of different ages can offer different advantages for you. For example, newer properties tend to have more tax depreciation benefits and are of low maintenance. However, they typically don't offer as much land as the older properties built before 1987. Contrastingly, older properties tend to be on a larger block of land but wet areas such as bathrooms and kitchens may need renovation or replacement as these areas are prone to damage overtime. Hence it is good to have both types of properties to benefit from the different advantages they have to offer.
If you require assistance or have an inquiry about purchasing investment properties or building your own property portfolio, you can contact us here to learn more about our investment strategy.
Disclaimer: This is not intended as legal, financial, or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature, you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.
