New vs old property

Which do you think is a better option and why?

1) A fairly new unit, located very close to the train station but on an extremely busy 6-lane road. The area has only one small supermarket and very few amenities. Price is below the median price for the suburb.

2) An old unit (over 25-30 years), located in a suburb with plenty of amenities, closer to public transport and plenty of shops around. Price higher than option 1.
 
how much higher in price in percentage terms?

I generally:
- prefer older but structually sound units, generally less in strata fees.
- wouldn't buy anything on an extremely busy 6-lane road.

If both units are within your price range, and the old unit is not too high, I'd get the old unit.
 
Which do you think is a better option and why?
2) An old unit (over 25-30 years), located in a suburb with plenty of amenities, closer to public transport and plenty of shops around. Price higher than option 1.

Like jpuff, this option.
Established suburb
Close to amenities & transport
Ability to add value with a reno
Lower strata fees
Higher land value component
Still 10 - 15 yrs of depreciation left
Quieter street

With the new shiny one:
Location is never going to get better - traffic flow will only get worse
Lower CG initially as developer takes it in his bottom line profit

Cheers, Alan
 
It depends on the level of demand relative to supply for each type of property. Buy the one where there is low demand vs supply. E.g. in the inner city, there might be excessive demand for run-down properties to do up, pushing prices above market. In the outer suburbs, most people might want a brand new McMansion, and so the price of established properties might lag market.
 
Hi aitsmoi,

This topic comes up at regular intervals. Here is something I wrote quite a few years ago (2003) in this thread....

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.

Since that time the older properties have gone up from ~$275k each to ~$500-550k each, while the 'new' properties on the smaller block of land have gone up from ~$550k each to ~$600-700k each.

bye
 
Wouldn't the place be pre 85 so you can't claim any depreciation?
From http://www.tslprojectservices.com.au/tax_depreciation_faq.htm
If my property was built before 1985, can I still depreciate on?
Absolutely. Everything in an investment property has an effective life and therefore is eligible for depreciation. The 1985 rule applies to another component of depreciation on the construction cost.

If your investment property was built before 1985 you don't qualify for the flat 2.5% depreciation for 40 years. The good news there is often thousands of dollars worth of inclusions aside from construction that you can claim.

However, I am not totally off the hook as when I answered I was thinking building depn. goes for 40 years :eek: - so you are right.

Cheers, Alan
 
Based on the limited info you've provided, I'd go the older one.

Location of the new one isn't good.

New units generally have higher strata fees and are at an inflated price compared to existing. Though depends if by new you mean brand new or just a couple of years old.

If you must buy a unit I'd go for one which is relatively new (better depreciation) in a small complex and good location.

Though you really need to do more due diligence to make a more informed decision.
 
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I think that you need newer, but older property - not brand new.

Why?

Brand new often carries the developer's profit which you pay for. Overpiced basically. We bought a brand new townhouse once - but it sat on the market for about 5 months before I bought it at a discount - just market value really.

If you buy something 5-10 years old, there is a fair chance that it has been bought and resold, therefore the value of it now is reflected in a more realistic way on the open market - it is second hand.

As well as this - and this is critical - you still enjoy about 30 years of depreciation on the building, and the contents for a few more years as well.

Double win.

Now, add a nice rent return that is at the interest rate of the day or better and you have what they say in darts......

180!!

That's 3 x triple 20

(triple win)
 
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