Established or Build New

[Avatar1234]

Ok i am new to the IP forest and i want to make no mistakes. How do I start of with

my first IP property. there is a lot of buzz around IP as brand new property and

i dont know what advantages it brings with building a new house than buying existing house?

are there any tax breaks if you build and how much? i am looking at 450k to start with new or old

after weighing up. please help!

 

[ej89]

Ok i am new to the IP forest and i want to make no mistakes. How do I start of with

my first IP property. there is a lot of buzz around IP as brand new property and

i dont know what advantages it brings with building a new house than buying existing house?

are there any tax breaks if you build and how much? i am looking at 450k to start with new or old

after weighing up. please help!

Depends on how much money you have to start with and what your goal is..I know in Sydney I can get a new house cheaper than older houses in an area both in SW and NW. Difficulty is that its real hard to get land.

Unsure what its like in Melbourne or Brisbane though

 

[j_p]

You have come to the right place to start. Spend some time here reading as much as you can, eventually things start to sink in. Use the search function for specific questions.

There is buzz around new properties because more parties have more to gain from their build and sale VS an established property.
Do some research on growth in various areas and you may see that some of the "benefits" of building aren't so great compared with the CG you may be sacrificing, benefits such as;
- Reduced stamp duty, you only pay on the value of the land
- Increased Depreciation, established properties will have some but it won't match a new property.

There are reasons to avoid building, especially in new estates where there is lots of competition and an abundance of land.

If you want to avoid mistakes I would suggest that the easiest option with the least pitfalls is to buy a well placed established property after doing Due Diligence on the area.

Finally, why are you looking to invest? Sharing this and a few other goals will help everyone give more specific feedback

 

[Avatar1234]

yes i agree that we get depreciation out of new home but i want to know how much?

how much return can we expect in depreciation?

 

[BayView]

Ok i am new to the IP forest and i want to make no mistakes. How do I start of with

my first IP property. there is a lot of buzz around IP as brand new property and

i dont know what advantages it brings with building a new house than buying existing house?

are there any tax breaks if you build and how much? i am looking at 450k to start with new or old

after weighing up. please help!

New builds will have more depreciation than an older existing building.

Anything you buy built after 1987 will have a 2.5% depreciation for 40 years from year of construction.

If it was built in say; 1997 and cost $100k to build, you have $2500 per year to claim, until 20037...you have 22 years left.

Be careful with new builds; a portion of the cost is builder's profit (and that's fair enough, too) but it means that your brand new house might be a bit overpriced.

My suggestion for your first one is maybe look at something say; 10 years old or even 5 years old - it already has had some time to be revalued against the rest of existing stock in the area, and the value will be more accurate, and you still get many years of depreciation.

 

[Avatar1234]

Really

Bayview# are you sure 2.5 for that long. one developer told me a new building

only depreciates for 3 to 4 years and then stops. i am in mlebourne.

 

[Rixter]

Bayview is correct.

2.5% for 40 years on Buildings for standard residential lets

4% for 25 years on Buildings for residential holiday(short term) lets.

Both the above have additional fitting/fixtures depreciation.

 

[Avatar1234]

Ta

unbelievable. for a 300k it will be 7500 in depreciation alone. any rental income with 80% LVR cannot ever cover the depreciation of 7500 and

you prety much pay no tax for a good long time and you do get some tax back for high income earner. Tax man is crazy!!

 

[BayView]

unbelievable. for a 300k it will be 7500 in depreciation alone. any rental income with 80% LVR cannot ever cover the depreciation of 7500 and

you prety much pay no tax for a good long time and you do get some tax back for high income earner. Tax man is crazy!!

You still pay tax.

The depreciation allowance etc comes off your taxable income - of which the rent is added to and forms your total taxable income..

Say you pay $30k in PAYE tax per year, it might mean you get back say; $10k of a $30k tax bill - as an example.

 

[Angel]

Bayview# are you sure 2.5 for that long. one developer told me a new building

only depreciates for 3 to 4 years and then stops. i am in mlebourne.

That is because he has a vested interest in selling you a new build. Also depreciation is under the federal taxation laws, not state. Stamp Duty calculation is different in each state.

 

[wombat777]

Be careful of new builds if you are investing in an area where there is low growth or falling property values. You can have issues with bank valuations changing between loan approval ( based on the plans ) and the valuation of the completed house.

It will be a bigger issue at higher LVRs.

If you get a lower than expect valuation at the end of the build, you may be expected to contribute more of your own funds at the final stage of the build.

 

[Avatar1234]

Ta

#Bayview i think it is still the same in essence taxable income goes down with interest paid + depreciation + maintenence and this is again added with rental income which will be -ve geared ofcourse. in essence a really dump tax reform to promote housing bubble and wreck other investment sectors. AUS is headed for recession.