There are advantages for both styles of properties, and it really comes down to your short and long term objectives. Where you intend to purchase the property will also influence what type of properties are available in a particular geographic location.
Purchasing a property off-the-plan – which allows you to lock in today’s prices for a property that may be finished in a year or two in the future – can be an effective investment strategy as you will not have to make any mortgage repayments until the property is ready for habitation. The only cost will be the deposit.
The key potential pitfall with an off-the-plan purchase is that there is no guarantee that the property you buy today will have grown or even maintained its value. The downside of this is that your lender may not be willing to fund the entire purchase price, which will leave you with a shortfall.
There are also pros and cons associated with the purchase of an existing property.
One of the key benefits is that during a slower market you might have greater scope to negotiate on price. In addition, you may be able to add value through renovation – which will modernise the property and possibly help you achieve higher rental return.
On the flip side, existing properties may require more maintenance or have serious structural defaults – which can be expensive to fix. It might also be more difficult to attract tenants to older properties.
Feel free to contact us to explore your options as well as investment property financing strategies.
A dwelling – unlike the land on which it is situated – is a depreciating asset, under Australia tax law. While land values generally increase over time, dwelling values (including their fixtures and fittings) decrease.
What this means for you is that you can claim as a tax deduction the depreciation of your investment dwelling and its inclusions. New homes tend to depreciate faster than old ones in the first ten years so this might be a consideration when you’re making an investment.
But your first move should be to speak to a professional adviser, such as your accountant, or contact us and let us walk you through your options.