Should you buy a new or old investment property?

There’s a lot of debate on the benefits of new versus old investment property, but there is no one size fits all answer. Factors such as your financial position, available time and renovation skills all influence what sort of property is most suitable for you. Below we discuss the pros and cons of each, as well as suggest who each option is best suited to.

New PropertyOld or new resized

New property is highly desirable by tenants, but you pay for it. New houses can be up to 25% more expensive in some areas, so you need to weigh up whether it’s worth it.

Pros

  • Greater demand – Properties are typically built with the current and future market in mind, following trends in design, materials and lifestyle. It’s likely that a new property is going to meet the local demographic well.
  • Protected downside – If the rental market takes a turn for the worse, it’s more likely that you’ll see a greater vacancy rise in older properties than with new. Because a new property is likely to meet the needs of renters better than an older one, when supply exceeds demand, renters are more likely to gravitate towards newer properties. This gives you some peace of mind knowing that you’ll probably come better off in a downturn.
  • Fewer repairs – It doesn’t take much to destroy the yield on your property by having to replace the dishwasher and hot water system. A new property will have everything under warranty, and even once the warranty expires, things should last a relatively long time.

Cons

  • Premium pricing – Like all new items, new property is priced at a premium. But the key difference compared with most consumer goods is you won’t lose value on the day you buy it. It’s important to weigh up the cost holistically – the purchase price may be higher, but you’ll also likely attract higher rent, lower vacancy, tax benefits and it will be easier to manage.

Old Property

Whether it’s a renovators delight, a cheap red brick walk-up or a quaint little cottage somewhere, older properties have charm and can be great value for money for the right buyers.

Pros

  • Potential to grab a bargain – It’s getting a lot rarer these days, but it’s possible to hunt down a deal with an older property. Just be careful that you don’t spend a year or two looking for the perfect deal though because you could end up spending thousands of dollars more than the properties that you rejected earlier.
  • Opportunity to add value – If you’re handy and have time on your side, it’s possible to increase the value to an older property. TV shows like The Block have demonstrated you can completely transform property, and a new kitchen, bathroom or paint job can have a significant impact. However be careful of overspending and be realistic about your skills – as soon as you start hiring tradespeople the potential upside is getting smaller. If you don’t know which end of a hammer to hold it may be best to avoid renovations.

Cons

  • More work – If you buy an older property, you’ll likely be repairing and replacing things more frequently. It’s often the things that you don’t think of such as waterproofing, pipes and wiring that will really hit you when you’re back is turned. Allow a larger budget for repairs and maintenance on your property and make sure you get a thorough inspection of your property before buying.
  • Lower rent – Demand is generally lower for older properties, so it’s likely you’ll generate lower rents. Furthermore in a downturn, an older property will take longer to rent.

So which one is right for you?

There isn’t a straight answer that works for everyone. As a general rule, if you’re handy and have the time, adding value to an older property can work well for you. Just be very careful with the purchase price as competition is high. However if you’re time poor and want a more secure, stable investment that’s hands off, consider buying new. It will be easier to rent at higher levels, you don’t have to put a lot of time and effort into it, and the tax advantages are also handy.