Investing in new vs established properties – Which is the best?

With the advent of reality TV shows like The Block, many property investors are fixed on the idea of finding a ‘fixer-upper’, a diamond in the rough that can be transformed into a lucrative investment. The belief is that by investing in an established property, fixing it up and then selling or renting it out at a higher price, investors can make more profit compared to buying a new one. But is this always the case? What are the pros and cons of investing in new vs established properties?

Investing in new vs established property

To accurately assess the best type of property to invest in, it’s important to understand the differences between new and established properties. New properties are those that have recently been built or are still under construction, while established properties refer to older properties that have already been lived in by someone else.

And when it comes to deciding whether to invest in new vs established property’, both options have their own sets of advantages and disadvantages.

While older homes can be located in established neighbourhoods, with good infrastructure and amenities, they may also require more maintenance and renovations, which can add to the overall cost of investment.

On the other hand, new properties are often built in developing areas that have a lot of growth potential.

Finding the right choice 

Deciding whether to invest in new property or pre-owned properties requires a detailed analysis of the market. Before making a decision, investors should consider the following factors:

  1. Location and market trends: Analyze the real estate market trends in different locations. Some areas may offer higher potential returns for new constructions, while others may be more suitable for investing in established properties due to their historical value or stable rental demand.

  2. Rental yields: Examine the average rental yields of new versus established properties in your targeted location. This will help you understand which option might provide better rental income relative to the purchase price.

  3. Capital growth potential: Research the historical appreciation rates of properties in the area. New properties in developing areas may offer higher capital growth potential, whereas established properties in mature neighbourhoods might have a more stable growth trajectory.

  4. Financing and tax considerations: Understanding the financing options and tax implications for both new and established properties is crucial. New properties might come with certain tax benefits, such as depreciation deductions, which are not as substantial for older properties.

  5. Maintenance and upgrade costs: Factor in the probable maintenance and renovation costs. New constructions typically require less maintenance initially, while older properties may necessitate more frequent repairs and updates to remain competitive in the rental market.

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