When it comes to why some people succeed in property investing and others don’t one of the key factors can be because of the type of property they select as their vehicle. We believe that buying brand new properties as investments give our clients greater opportunity for successful outcomes.
At Dinas Estate Agents Personalised Property Investment we believe in our Buying New vs Buying Old TOP 6 Property Investment Comparisons as a vital tool in selecting a viable investment.
1. Less Investor Weekly Contribution: Highest at number one for buying a new property is Less Investor Weekly Contribution. This is what the investor would be required to pay after tax for the shortfall between incoming cash flow such as rents etc and outgoings paid such as interest etc. By buying new properties you minimise this outlay thus conserving your cash flow via many factors.
2. Higher Rental Yields from new properties: Coming in second as a major factor for buying new property is Higher Rental Yield. Being brand new, the properties are able to be rented at their highest maximum asking price. Often presenting with the latest design features, modern appliances and up to date fixture and fittings landlords are more easily able to ask a premium rent for their investment. Older properties tend to be rented for lower rental yields primarily due to the nature and appeal of the age of the carpets, kitchens, bathrooms etc.
3. Less Vacancy: Thirdly Less Vacancy. Tenants will often apply for, select and prefer, new modern, clean properties with updated amenities and the latest look over older properties thus leading to a potential higher vacancy rate/time between tenants for older properties than newer ones.
4. Less Maintenance: This one that many landlords would prefer and that is, the greater potential for Less Maintenance. The building, fixtures & fittings are all brand new, therefore giving an increased likelihood of less repairs and subsequently fewer outgoing costs to the investor when compared to aging properties where potential costly replacements of high value aging items such as hot water systems, carpets, heating/cooling systems and other fixtures and fittings could undermine their investment profitability.
5. Greater Tax Depreciation: For those investors who would like to legitimately pay less tax comes Greater Tax Depreciation. As a landlord you have more legal tax deductions from the building depreciation of a brand-new investment property for 40years and also from the property’s fixtures & fittings as per their individual lives if purchased after 9th May 2017. Under new rules, investors who acquire a second-hand property after 9th of May 2017 will not be able to claim depreciation on existing plant and equipment/fixtures and fitting assets.
6. Home Owners Warranty: And lastly is the peace of mind that brand new properties often come with a builder’s 6.5yr home owner’s warranty insurance where as there is no warranty insurance for properties over 6.5years old.
In conclusion, brand new properties with higher rents, more tax benefit, less maintenance & less vacancy lead to a lower after-tax weekly contribution to the investor compared to an older property purchased within the same parameters and locations. Older properties generally have a lower rental yield, less tax benefit and often more vacancy and maintenance leading to a higher weekly after tax contribution. In our opinion this makes buying brand new property investments a more likely choice however this is only one component to investing successfully. To learn more about other components vital to successful property investment register for our FREE 1hour Intro Hour.
For more information on selecting your first or next investment property please call either Jim Dinas or myself (Vicky Dinas) on 03 59 883358.