I’ve been saving for years and I think I’m finally in a position to invest. A friend told me a brand new property is the way to go. Seems risky to me when compared to a property that’s already been built. Better the devil you know and all that!
There are several reasons to buy a new investment property versus something that already exists.
The main reason is that brand new property has depreciation benefits that can really help you come tax time. Simply, renting out a new apartment allows you to claim the depreciating value of the fittings and construction from the very beginning, when they are brand spanking new – when they are worth the most. If the apartment is older, you will only be able to claim depreciation on the value remaining. (But don’t take our word for it – consult your accountant for tax advice.)
A word of caution – don’t only look to tax benefits to make your investment decision, or you may end up with a lemon. The investment property – new or existing – must be able to perform financially in its own right, without relying on your income circumstances to make it worthwhile. The kicker is that for most people, it’s those tax benefits that allow you to have the money available to hold the property.
There are risks in buying a brand new property, and mitigating those risks is absolutely imperative. This is not the place for an exhaustive list, but give us a call or book into Table for Eight – our property investment workshop held on Thursday nights and we can give you the full rundown.
Finally, there really is no such thing as the “devil you know” in property. One of the staff members here at Aviate purchased an existing apartment, commissioned the building survey (clean as a whistle), had the apartment tenanted, only to discover a common wall had water and damp problems reoccurring every storm. He’s about to clean off the mould, replaster and repaint a third time after having the problem fixed (again). If he had bought this apartment brand new, he would be covered under the builders’ warranties and defects period.