Why property investment is out with the old and in with the new
Properties are cropping up for sale all over Queensland, and while it might be tempting to purchase an established property, don't be fooled. Off-the-plan or new builds can end up being more profitable, easier to manage and cheaper to maintain than properties that are already past their prime.
Here's what you need to know.
Established property, established issues
Straight off the bat, there's the fact that established property can end up having concealed issues, cleverly hidden away by the vendor or simply unnoticed. This can range from uneven stumps to foundation issues to leaks in the roofing – any of which could end up costing you thousands in repairs.
These kinds of issues aren't exactly uncommon either – in fact, according to Archicentre, about half of the homes that receive pre-purchase inspections end up having some kind of roof problem. That doesn't include the chances of termite infestation, rotten wood, rising damp and all the other various little issues an established home can end up having after a lifetime of poor maintenance.
Missing out on depreciation
There are all sorts of things you can claim as an investor, but you might be surprised by just how much you can save from the tax man from something as simple as depreciation. With the right schedule, you could end up offsetting tens of thousands of dollars, simply by claiming depreciation on things like fixed cupboards, carpets or even curtains.
With an established property, the initial value of these assets will already be lower, so you are missing out on some claims by coming to the party late, so to speak.
Ready right out of the box
With a new build, it's ready to go right out of the box.
When people are trying to earn a little bit more income from their rental properties, they might decide to spruce it up for an incoming tenant. With established properties, you are probably going to have to do this regardless of the previous tenants. Ripping out carpet, replacing curtains, generally cleaning, maybe even having to hire a gardener. It's all quite exhausting, and it can end up costing you additional capital too.
With a new build, it's ready to go right out of the box. Assuming your tenants stick around for a little while, you might not need to go through a spruce for years – just another thing that you don't have to worry about with an off-the-plan build.
Established properties can seem like a good idea, but remember: It might already be built, but that doesn't mean it's ready to build your wealth! For more tips and tricks on the right investment strategy, make sure you get in touch with the property mentors right here at Think Money.