How important is buying new?

Hi guys, I have been speaking to a certain property advisor and I have been told seriously consider Gladstone Qld and to buy new. I know that when you buy new you get a better Tax Depreciation Schedule...but how important is that? H/e has shown me a couple of properties that are new but are over $400,000 and they look ok but after looking on realestate.com.au I can see a TON of great houses that are in the early 3's. I am talking a $100,000 discount here!

I am going to use the IO mehod but is it really worth paying such a premium to get into a new house or shoul I save $100k and buy an existing good house and try and snag a bargain from a motivated private seller and leave the developers alone?

Cheers.
 
To me its like buying a new car. In 3-5 yrs time your new property will be worth the same as the sub $300k ones. Why pay extra, i reckon?
 
I think the major difference is the tax break due to the much improved depreciation schedule as I believe older places ones are virtually zero which makes it quicker for me to buy another using my tax
 
buying new or old really depends on personal finances. DH and I are 'buying new' (ie building) because in our case there is significant financial benefit for us as well as maintainence benefit as we intend to buy and hold long term. Also the cost of the house we are building is around the same as if we were to buy an older place. If i could get a similar place of similar value, for 100k cheaper I would certainly be looking at that rather then buying new.

My advice is to consider EVERYTHING (new, old) and run your own figures on it. Also make sure the value is in the place you are looking at purchasing - no point owning something new and flashy, if it isn't worth as much as you are paying.
 
I think your property advisor has a vested interest in these propertys he is trying to flog you, 99% he is getting a kick back for selling em 2 u.

Give property advisor a flick and talk more on here

deprication shouldnt be a primary motive for buying
 
If you are paying (say) $70,000 more for the new one. Add the extra stamp duty then that's nearly an extra $4,000 a year interest. Take that off the extra you'll get in depreciation.

Then in 10 years time you have an apartment that's worth the same as the one you could have bought for $70,000 less.
False economy I feel.

Also have a look at some sales figures for units 5 years after they were built.
Ones I looked at recently (5 years old now). Sold new for $335K in 2004. Several sold last year at auction (mortgagee) for low $200's. Last 5 for sale now $265K.

Just be careful. Pays to do your DD.
 
Hi all,

This is from this thread 6 years ago.......

http://www.somersoft.com/forums/showthread.php?t=10659&highlight=mulgrave&page=2

Lets see, 2 x 4 bed/2 bath on 600m2 each(established and close to shops/schools etc) for $550k.

OR

1 x 4 bed/2 bath on 400ms a little further away from shops/schools etc(new), for $550k.

It's a no brainer in EVERY suburb. The cap growth of the 1200m2 will be much greater than the 400m2. The new building will depreciate in value faster than the established building in every suburb.

How are those same properties today???

The older 4x2 that were $275k in 03..... $450k 09

http://www.realestate.com.au/cgi-bi...r=&cc=&c=46053392&s=vic&snf=ras&tm=1250673300

The 'new' in 03 are now 6 years old, there are currently none for private sale, but some like this for auction.....

http://www.realestate.com.au/cgi-bi...c=&c=47289191&m=1&s=vic&snf=ras&tm=1250674486

In REA speak the suggested price area of ~$475k really means about $550k-$600k, :rolleyes: It doesn't matter, you don't have to be Einstein to work out which has had the better growth.

bye
 
Depreciation is a useful thing to assist with holding costs, but I reckon it should be way down the list of criteria for choosing a property. And that's coming from someone who has a vested interest in pushing the depreciation barrow.

An established house that is, say, 5 years old will have alot of depreciation in it, too. But you won't be paying the 'new' premium. And your 'property advisor' will be missing out on a comm.

This concerns me:

I can see a TON of great houses that are in the early 3's. I am talking a $100,000 discount here!

I don't know anything about the market in Gladstone, but this indicates more supply than demand.

Scott
 
Depreciation is a useful thing to assist with holding costs, but I reckon it should be way down the list of criteria for choosing a property. And that's coming from someone who has a vested interest in pushing the depreciation barrow.

An established house that is, say, 5 years old will have alot of depreciation in it, too. But you won't be paying the 'new' premium. And your 'property advisor' will be missing out on a comm.

This concerns me:



I don't know anything about the market in Gladstone, but this indicates more supply than demand.

Scott

Great reply Scott. So you are saying that depreciation is a great tool but if you can buy a property for a bargain price in that area that should be the right buying criteria and any depreciation is a bonus right?
 
Hi Scotty and everyone

Before buying new, read my following "hypothetical" story...

Lets imagine I buy a new property on the gold coast for $200K. Meanwhile, the developer is putting in a whole new street of properties around yours every month or so. In twelve months time, the developer isn't selling off stock as quickly as he'd hoped, and he starts discounting his properties, and discounting them some more, until such time that he just wants to get out of them even.

He's now selling brand new houses in your suburb for $160 000. Meanwhile, I suffer some sort of catastrophic event, and I need to sell my house that I bought 18 months ago for $200K. New ones are selling for $160K. I borrowed $180K just to buy the place originally... I'm now totally screwed! Ok, I understand vendro finance, so I'm not screwed - but most people would be.

Now, I'm not saying that buying new properties is always a bad idea, but it would be a cold day in hell before I'd buy a brand new property in rural Qld. I wouldn't necessarily say that your advisor is on the take - he may just be mentally challenged! :)

As you seem to be getting your head around, any sort of tax benefit is a BONUS. It is not something that you put high up on your list of decision making tools.

Good luck finding a new advisor! :)

Andrew
 
Great reply Scott. So you are saying that depreciation is a great tool but if you can buy a property for a bargain price in that area that should be the right buying criteria and any depreciation is a bonus right?

Generally speaking, I guess ideally you buy a property at what you think is a good price in an area that you hope will go up in value. You don't buy a property for the tax breaks.

Buying brand new property you often pay a premium because there can be a few fingers in the pie. And buying in a new estate on the outskirts of a regional town will always be a punt.

I've been to seminars and talked to people at property expos etc who have been flogging brand new property. The depreciation returns are a big part of the pitch. Sure, depreciation is a good tax deduction, but if the property is expensive relative to nearby properties, and if it's in an area that may not see much growth for some time, it doesn't stack up. (But as I said, I don't know anything about the Gladstone market.)

Scott
 
There's no right or wrong way to buy property, there are just different ways. You have to decide what you'd rather do.

My concern with older properties is that you don't know if there are any hidden faults that could turn out to be quite costly. My fear is that you buy a property which as it turns out, it needs some major repairs, in which the place needs to be vacant for. So you have loss of rent and major costs which could cause some stress. You'd have to be pretty unlucky for that to occur, but there's always a chance ...

I'm a believer in new property, but not brand new.
We bought our first IP brand new OTP. I wouldn't recommend OTP as it's tricky to calculate things. Once the property settled it was valued 10% less then we paid so we needed a bigger deposit and the rent we got was $20 less a week then we were told a year ago that we could expect. BUT with the tax depreciation the property is cashflow +. I know it may be some time before we see some equity but it will come eventually and in the meantime the property hasn't cost us a cent to hold.
 
Jodie,

In in my travels and research...new or newish properties have about a 5-7 year lag before they become profitable.

I for one ..am impatient and want both return and CG!

I bought a older property in 2006 for 130K ...I did a reno in 2007 for 10K...it is now worth 210K and returns about $11.5k pa in rent. About a 8.2% retun after the renos.

I'm a believer in new property, but not brand new.
We bought our first IP brand new OTP. I wouldn't recommend OTP as it's tricky to calculate things. Once the property settled it was valued 10% less then we paid so we needed a bigger deposit and the rent we got was $20 less a week then we were told a year ago that we could expect. BUT with the tax depreciation the property is cashflow +. I know it may be some time before we see some equity but it will come eventually and in the meantime the property hasn't cost us a cent to hold.
 
My concern with older properties is that you don't know if there are any hidden faults that could turn out to be quite costly. My fear is that you buy a property which as it turns out, it needs some major repairs, in which the place needs to be vacant for. So you have loss of rent and major costs which could cause some stress. You'd have to be pretty unlucky for that to occur, but there's always a chance ...

Jodie

I'm not sure I agree here - a lot of the stuff that's gone up in the last 10-20 years doesn't look particularly well built to me plus the floor plans tend to be smaller / more poky than in older properties.

If there are major structural issues in older buildings your building inspector will / should pick this up and you don't buy. Anything new hasn't had the 20 major storms / several summers of intense heat, termites around etc. to show you how well it's going to cope with it and what the major floors of the design are. With older properties I feel I get what I see.

Personal preferences I guess and also what kind of houses you are looking for.

kaf
 
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