To Build, or to Buy – Let’s compare the 2 Investing Strategies!
on August 2, 2011 by Mick Conyngham
So the question is: 'To build, or not to build!'
When I first got into the property market, my strategy was to buy the cheapest established house in the suburb, detonate and renovate. It worked well for a while, until I realised that buying a “Just move in” house requires less money down, is less risky not to mention the savings on time, effort and the stress of knocking out walls with a hammer.
Personally, as I look back, I wish I'd known what I know now! With the time and money I've invested in the past I would have seen much better returns..
So to answer the FAQ from investors (should I buy an existing property, buy off the plans or a house and land package?), I'd like to give you both side of the story so you can be fully informed and make up your own mind. At the end of the day answer will be different for everyone, it depends on the individual.
Advantages of buying existing
- What you see is what you get.
- You buy in an already established suburb, where you can see value in the location For example: compare appreciation on the beachside of the highway, over buying across the opposing side of the highway.
- In most situations existing properties are closer in to the heart of the city. It can be an affordable avenue to entering into more exclusive suburbs.
- If you can buy the worst house in the best street, and doesn’t mind a little blood sweat and tears, in the end the work will more than likely to pay off.
- An existing property is easier to faster to attain a rental return
Positives of Buying New
- Depreciation Tax deductions can be claimed for new properties and can potentially save you thousands of dollars per annum. Combined with potential stamp duty exemptions and government incentives, your initial outlay of costs are reduced significantly, and allows you to enjoy bigger capital growth.
- New properties have nil or low maintenance cost compared to existing properties. Also, you save further costs in “building and pest” reports.
- Up and coming areas have good potential capital growth. In some cases when buying off the plans you'll even get the benefit of capital growth before you start paying a mortgage. I would look in areas still with room for growth, rather than those that have had growth.
- Newer properties can often have better rental return as tenants such as families don’t mind paying a little more the luxury of a “new home’
So there you have it - both sides of the coin, which one will you call?