What are the pros and cons of investing in new vs. established properties?
Usually, when we buy something, take a smart phone for example, we prefer for it to be brand new. But when we’re buying cheese or even alcohol, we go for the items that are age old. Even fashion has a ‘vintage’ category. So, when it comes to investing in properties, it is common when investors ponder whether to invest in new or existing/established properties. We at The Investors Agency are right here to guide you into making informed decisions with your valuable investment.
Know the difference
In Layman’s terms, it is clear what new and established properties mean. But the property market has its own definitions when it comes to investments in properties.
New properties
These are the properties that are brand new and unused. They have just freshly entered the market for sales right after construction. New properties come with modern fittings and interior fixtures along with standing warranties from the property developers.
Established properties
These properties often come with a history where they have had previous owners or tenants. Established properties often need renovations and updates because their condition as occupied will require improvement if the property needs to be sold on the market.
The pros of investing in new properties
Minimal maintenance costs
When investing in a new property the need for facing costly repairs and other maintenance issues is significantly lower than established properties. The warranties issued by the developers or contractors will cover any such costs. There will also be fewer issues with electrical systems and plumbing as the property comes with modern appliances and infrastructure.
Attracting tenants
Many tenants prefer living in brand-new houses with unused appliances. This means new properties often appeal to the rental demand in the country and enjoy high rental yields. The vacancy rate will not pose a problem for the property investor as the new property will continue to stay pristine in the market.
Incentives from the Australian Government
The First Home Owner Grant provides a one-off grant to citizens who fulfil the required criteria. Under the First Home Guarantee Scheme, the federal government of Australia took a massive initiative to push people to invest in properties sooner. This scheme focused on offsetting the effects of GST on home ownership.
Huge tax benefits
Under the First Home Super Saver (FHSS) scheme, the Australian Government further offers concession contributions which are taxed at a lower rate of just 15% (which is usually less than what you’d pay based on your regular income tax rate). Moreover, if you’re using the FHSS scheme, you get a tax break called the FHSS tax offset that gives you back 30% of the tax on the amount you have saved through the scheme.
Here comes the limelight: The person need not be an Australian citizen or even an Australian resident for tax purposes to use the FHSS scheme. This will enormously increase the possibilities of foreign investors opting for the Australian property market.
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Do you have $85,000 saved in cash or equity? Start your investment journey with us
With $85,000 in savings or equity, you can begin or grow your investment portfolio with high-growth properties in Australia's strongest property markets.
The cons of investing in new properties
High purchase price
With new infrastructure and modern interiors comes a high purchase price. New properties tend to be more expensive than established properties. This can affect the borrowing capacity or the overall investment strategy of the investor.
Uncertain capital growth
While the investor can benefit from tax deductions and high rental yields, it is possible to face a slower capital growth. This can affect the long term investment goals of the investor. Newly developed properties take time to gather value in the market.
We at the Investors Agency carefully evaluate these risks and provide efficient strategies for our investors to mitigate them. We assist in making the final decision of our investors by providing in-depth market knowledge to assess the potential of new suburbs.
The Pros of Investing in Established Properties
Lower Purchase Price
Established properties are generally more affordable than new buildings. This allows the investors to buy more than one property simultaneously depending on the financial situation. Additionally, some established properties come with existing tenants which will provide immediate rental income without the deal that is expected in the new buildings.
Prime Locations
Established properties mean that they have been previously chosen by the tenants because of their convenient location. So, with this precedence, these areas tend to have strong demand from renters and buyers offering consistent growth potential for the investors.
Potential for Renovation
Including the fact that older properties give long-term capital growth, they also add the possibility for valuable renovations. With major refurbishments, an established property can increase rental yields and get more market value. Established properties with new improvements to their infrastructure can stand as an attractive deal for buyers and tenants.
The Cons of Investing in Established Properties
Lower Depreciation Benefits
Without any encouraging schemes from the government, established properties do not offer the same depreciation allowances as new homes. Fewer tax benefits reduce the flock of investors coming towards established properties.
Recurrent maintenance
Established properties will potentially lead to recurring maintenance. As the property is prone to structural damage, it is possible that they are prone to structural damage, it is possible that they will inflate the costs beyond the initially planned budget.
We at the Investors Agency have extensive expertise in handling such risks. We assist with thorough property analysis including shrewd property inspections that will help our investors to make well informed decisions with their investments.
Where the Investors Agency stands out and how we can help you
We specialize in guiding property investors through every step of the investment process. We provide essential assistance to our clients with respect to their preferences in properties. Be it new or established properties, our data-driven insights will significantly increase the profit margins for our investors.
Here's how we offer our expertise:
- We create and manage our investor’s profile that is built upon considering the financial situation, risk appetite and various other essential factors.
- We provide a customized search process where we lock down the ideal property for our investors by going on a hunting spree.
- We assist with property presentations for our investors after making sure that our clients are satisfied with our service.
- With a detailed property walkthrough, we address the potential concerns of our investors.
- With our rich network of property managers, we help develop and manage the properties of the investor.
- With a thorough inspection of the property, we finally provide the quality report for the building.
- Here’s how we stand out: With further discussions, we assist our investors to use their equity as a deposit for another investment.
Frequently Asked Questions
1) Is it better to invest in new or established properties?
It entirely depends on the preferences and investments objectives of the investor. With professional help from our Investors Agency we help you reach more positive results with your investments.
2) Do new properties have better rental yields?
New properties often attract higher rental yields due to the brand new equipment. However, established properties in prime locations can also generate strong rental returns.
3) How can a buyer’s agent help me choose between a new and established property?
A buyer’s agent at the Investors Agency will help you analyze your financial goals, risk tolerance, and market trends to choose the right property for your investment portfolio.
4) Is there any concessions provided by the Australian Government?
Yes. Schemes such as FHSS and FHGS can boost the investors to opt into investing in the property market of Australia.
5) Are property investments worth it?
Despite new or established properties, we at the Investors Agency will guide you into making informed decisions thereby making any investment worth it.
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