The lure of the new - why some investors love brand new properties
Whether off-the-plan or just completed, brand-new properties are often very attractive to investors because they offer potential financial benefits, attract great tenants, and come with certain guarantees that older properties can’t offer.
Understanding the pros and cons of buying a new property will mean you are better prepared when it comes to deciding how to invest your money.
Let’s dive into what makes brand new real estate so attractive to some buyers.
Tax depreciation allowances
When you buy a rental property, you can claim tax deductions for depreciation on the building, fittings and fixtures, increasing your cash flow and significantly reducing your tax bill over several years.
Current legislation allows investors to claim 2.5% of the property’s purchase price each year for 40 years from the time the building was completed. This is called capital works depreciation. Obviously, the newer a building, the longer you will be able to claim this deduction.
Investors can also claim depreciation deductions over several years for all new fixtures and fittings in the building, provided the property was used to generate income. This includes things like any carpets, blinds, kitchen appliances, air conditioners and so on, which you have paid for or which were included in the purchase price of a new property.
Negligible maintenance costs
Older buildings often require more upkeep than new buildings, meaning far less expenditure on maintenance for a good few years when you buy brand new. This includes appliances, which are likely to still be under warranty if something does go wrong, and fixed assets like carpets, taps, and light fittings.
In addition, builders in NSW are obliged to provide a six-year warranty for major building defects and a two-year warranty for all other defects on new constructions – a bonus that old properties definitely don’t provide.
Compliance
New properties are built to comply with up-to-date legislation, which means that you won’t have to fork out for compulsory updates to meet fire safety standards and other recent building regulations, which can be extremely burdensome in older buildings.
Appeal of a brand new property
New buildings often have great features, extra amenities, loads of natural light, modern appliances, and a sense of freshness that all appeal to tenants.
Energy efficiency, environmentally conscious design, and modern security can all be huge drawcards for prospective renters.
Tenants are often prepared to pay premium rent for the privilege of the new, and this means a higher income with lower associated costs for you.
Are there any downsides to buying a brand new property?
While new properties offer several advantages for investors, there are a few factors to consider when choosing your next investment.
New properties won’t provide a lot of room for renovation or improvement, meaning that although they may present immediate positive cash flow, they may take a little longer to produce substantial capital gains.
Depending on the area that you are looking at, there may be a high number of new properties flooding the market, which will affect value and desirability. Research carefully and turn to your real estate agent, who knows the local markets intimately, for insights into the market.
Buying off the plan, particularly, may present a degree of risk as markets fluctuate over the construction period. If you are buying a property off the plan, it’s essential to do your due diligence with regard to who is responsible for the project and have your conveyancer or lawyer check any contracts or documents before you sign to avoid any nasty surprises further down the line.
Summing up
New properties, whether off the plan or recently completed, are an attractive proposition for many investors for financial, practical, and aesthetic reasons.
They can increase cash flow, attract the best tenants who will be happy to pay premium rents, and offer a sleek, modern look and lifestyle.
However, every investor is different, and it’s important to choose a property that suits your own investment strategy and financial situation. Always talk to your trusted financial advisors and real estate agent to make sure your investment decisions tally with your needs and work in your best interest.
What brand new properties are we selling
We have an extensive range of off-the-plan properties for sale; from luxury beachside apartments on Cronulla's Esplanade and Blackwoods Beach, through to boutique living on Pearl Main Beach, mixed use commercial developments on the Central Coast and many more.
To find out more about all our off the plan developments click here.
What brand new properties are we selling
We have an extensive range of off-the-plan properties for sale; from luxury beachside apartments on Cronulla's Esplanade and Blackwoods Beach, through to boutique living on Pearl Main Beach, mixed use commercial developments on the Central Coast and many more.
To find out more about all our off the plan developments click here.
Other buying, selling and investing articles and resources
Guide to property investment success in NSW
Selling a house or apartment in NSW eBook
Buying a house or apartment in NSW eBook
