Buy New or Used?



From: Kevin Rogers

So far my wife and I have bought investment properties through property investment promoters. All of them, so far, have recommended that we buy new properties rather than older properties because the depreciation tax deductions on building cost and fittings are much higher?

This seems to make sense, but is there a valid case for sometimes buying older properties?
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Reply: 1
From: Sim' Hampel

Older properties, particularly those that are "tired" can provide great short term capital gains from adding value, or renovating ! There are people who make a living from this alone.

Also, if you can pick the "wave" and find an area about to become gentrified, particularly with older "character" homes, then these can become very popular in a relatively short period of time, with significant increases in value as people move into the area to do up the old houses.

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Reply: 1.1
From: Tibor Bode

Hi Kevin,

New properties will provide better depreciation benefits, but in old properties you can also make a quick buck (and depreciation) as Sim indicated above. While my strategy based on 2nd hand properties, I would not close out a new one if the deal can stack up. You just have to be aware that on new properties it will not be YOU (except if you can make an exception deal or buy in bulk, or some other strategies) who will make the profit immediately, but the developer / promoter / R/E agent etc.
It also depends on your personal preferences and circumstances. If you consider off the plan, just make sure that you'll get what you've paid for. Some developer make shortcuts and you might be stuck with something you don't like. Another quick note, when rental guarantees offered, usually it is best not touching it.

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Reply: 1.1.1
From: Manny B

Hi Kevin,

as Sim & Tibor indicated, there are pros & cons with both... New IPs give you good depreciation schedules & most likely will require minimal maintenance, but I tend to like old properties as I tend to look beyond the old home (land value), I like the idea of renovating the home & plucking a unit in the backyard if there is enough land to do so (whether it is a corner allotment or not), that way you get a balance of both, older renovated home at the front (with some depreciation allowances) & the new in the back (with good depreciations)...

I personally think if the figures stack up, either one would do as long as it fits in with your ultimate goal/strategy...

Note: a quickly renovated home normally requires more maintenance than new once again (although it gives you a quick capital gain), as plumbing/electrical/hotwater system/heaters/stove/etc may still be old, unless you undergo a full renovation...


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Reply: 2
From: Will G

Some things I look for with old/new houses...
(I am not an expert and these are my views only)

Older properties(> 15 years old) have usually settled(foundations) and walls that will crack should have cracked. Houses built in areas with lots of clay seem to be more prone to moving foundations (I have first hand experience of this. After long hot summers and extended wet periods, clay expands and contracts. Foundations move and brick walls can crack.)

Older homes may have roots of trees growing into sewerage pipes that may prove costly to fix.

Older houses aren't usually as energy efficient but usually have larger blocks of land. They usually have enough off-street parking for more than 2 cars

New subdivisions containing a lot of newer houses may stir up termites. As gardens are established, draining patterns of the land may change due to retaining walls being built ...

There seems to be more building regulations these days so new houses should be built to a higher standard (in theory)

Building inspections on new properties may/may not find problems that will occur in 5 years. They are good at detecting existing problems.

A lot of new houses tend to look very trendy now but may date in years to come
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