When looking for an investment property to buy, property investors face an important decision: should you invest in a brand new or off-the-plan property, or is an established property the better choice? Both options have their merits and challenges.
In this video, Joanne Danckwardt of One Agency JD Property Agents explores the pros and cons of each to help you make an informed decision.
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Pros of Buying New or Off-the-Plan Properties
Modern Amenities and Design
New properties often come with the latest designs and features, appealing to tenants looking for modern living spaces. This can lead to higher rental demand.
Tax Benefits
Investors can claim depreciation on new properties, which can significantly reduce taxable income. This can make a substantial difference in overall cash flow.
Less Maintenance
New constructions typically require less immediate maintenance, which means fewer unexpected costs in the early years of ownership.
Warranties
For any issues with any appliances, they will generally come under warranty for any repairs.
Potential for Capital Growth
Purchasing off-the-plan can sometimes allow you to buy at a lower price before the property is built, potentially leading to increased equity once the property is completed and values rise.
Cons of Buying New or Off-the-Plan Properties
Market Fluctuations
The property market can change during the time it takes for an off-the-plan property to be completed, which may affect its value upon completion.
Delayed Settlement
Depending on the construction timeline, you may face delays in settlement, impacting your cash flow and investment strategy.
Overcapitalization Risks
New developments might come with a premium price tag that doesn’t always reflect future market conditions, risking overcapitalization.
Limited Character
New properties may lack the charm and character that some tenants prefer, making them less appealing in certain markets.
Pros of Buying Established Properties
Immediate Income
Established properties can start generating rental income immediately, providing a faster return on investment.
Proven History
With established properties, you can research historical performance and understand rental yields, vacancy rates, and growth potential in the area.
Character and Appeal
Many established homes offer unique features and character that can attract tenants, especially in sought-after neighbourhoods.
Less Risk of Delays
With an established property, you avoid the uncertainty associated with construction timelines and potential project delays.
Cons of Buying Established Properties
Higher Maintenance Costs
Older properties may require more maintenance and repairs, which can impact your cash flow and overall return on investment.
Limited Tax Depreciation
While you can still claim depreciation on established properties, the benefits are generally less significant compared to new builds.
Outdated Features
Established properties may not have the modern amenities that today’s tenants often seek, which could affect rental demand.
Market Value Concerns
If an established property is in an area undergoing decline, it may face a drop in value, impacting your investment.
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Choosing between a new or off-the-plan property and an established one depends on your investment goals, risk tolerance, and market conditions. Both options have their unique advantages and challenges, so it's essential to conduct thorough research and consider your long-term strategy.
If you’re not a One Agency JD Property Agents client, but would like more information on our property management service – contact us on 4285 7400 or jdpropertypm@oneagency.com.au. We are always happy to answer questions and offer advice, or offer a free rental property appraisal.
We hope these tips have been helpful. If you feel you could benefit from our experience with property management, we’d love to hear from you. Simply reach out. We hope that has helped you today. If you have any questions, we’d love to talk to you. Our number is 0426 264 771. We look forward to talking to you soon.
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