New or established?

[Green Grass]

Hi all. This is my first post! I am looking to buy my first IP and looking for some guidance.

I am keen on H&L to minimise my holding costs given the depreciation benefits (I pay 47% tax) and typically low maintenance costs but concerned that most areas where H&L packages are available have oversupply.

I am interested in arguments for and against H&L versus established and also any guidance on how to find H&L packages in areas where there is not over supply, which is evident in outer suburbs such as Craigieburn in Melbourne or Butler/Alkimos in Perth.

I may seek to buy 2 properties each around $450k to $500k.

Thanks.
GG

 

[Jess Peletier]

Hi GG,
Welcome to the forum!

Rather than looking for H&L, you could consider buying new/almost new in an area you feel has more potential for growth. If you're after high CG and don't mind having a neg geared IP you could look closer to the city, maybe for a unit in someone's recently completed small sub division rather than a new housing estate.

Another option is to buy old in an area that appeals and reno it - good depreciation that way too, and manufactured CG. Depends on whether your that way inclined or not.

 

[Snoopy]

The challenge with brand new is that you are paying a slight premium for the fact it is brand new. The other issue is that brand new tends to be closer to where there can be additional supply.

 

[Carrot01]

The challenge with brand new is that you are paying a slight premium for the fact it is brand new. The other issue is that brand new tends to be closer to where there can be additional supply.

exactly - especially the last point.

location is the most important thing - within reason

 

[Rixter]

Have the best of both worlds.....buy near new in middle ring areas that are land locked from over oversupply like is the case in outer fringe areas.

 

[spludgey]

The challenge with brand new is that you are paying a slight premium for the fact it is brand new. The other issue is that brand new tends to be closer to where there can be additional supply.

I agree with this post, but think that it's usually more than a slight premium. It can be quite substantial.

 

[Ace in the Hole]

Why not build a duplex rather than buy 2 separate properties?
All the benefits of new properties at a wholesale entry price.

 

[Green Grass]

Have the best of both worlds.....buy near new in middle ring areas that are land locked from over oversupply like is the case in outer fringe areas.

Thanks all for your responses which have been helpful. I had previously been considering only outer suburbs but clearly looking for nearly new houses in middle ring infill locations makes much sense. Satisfies my requirements of maximising depreciation benefits without outer suburb over supply risk.

 

[Green Grass]

Why not build a duplex rather than buy 2 separate properties?
All the benefits of new properties at a wholesale entry price.

Thanks but as a new investor, building anything at this stage is probably a bit of a stretch in terms of risk for me.

 

[fernfurn]

Jess, please explain. With the buy old, renovate and get depreciation option, can you claim everything you put into the renovation from your tax?

 

[Jess Peletier]

You can claim the interest on renovations, but not the cost themselves as they are a capital expenditure. Get tax advice, as some things may be claimable - for eg, if your wall oven is dead, the cost of replacement may be considered maintenance if you replace with similar quality (no upgrading allowed!)

If you renovate, get a depreciation schedule done up once you're finished as the new work should all be depreciable.