There’s so much to consider when you’re buying property. This is true whether you’re purchasing a home for you and your family, space for a business, or buying an investment property. One of the biggest questions to consider is whether to purchase a new property, meaning something recently constructed, or an older property.
It’s important to be aware of the risks; after all, no property is going to be perfect. Let’s review the three biggest risks of both new and old properties so that you can make a more informed decision.
Risks of Buying an Old Property
- Lower potential returns: This is something that you need to worry about more if you’re planning to purchase a rental property. Many renters prefer the convenience and attractiveness of a newer home. Typically, they are easier to maintain, have more up-to-date appliances, HVAC systems, and similar features, and have a more modern look.
In order to mitigate these factors, consider an older property that has been recently updated or think about how you might be able to update it yourself.
- Sneaky problems: The older the property, the greater the chance that there are going to be problems you don’t immediately notice. Very often, the seller may not know about them either; they are revealed during the house conveyancing. This can include everything from issues with the foundation to termite damage in the walls.
Be sure to schedule a thorough building inspection with an experienced, impartial inspector during the house conveyancing period. Try to find someone who has experience inspecting older homes.
- Low depreciation: In some ways, this isn’t necessarily a bad thing since the property has already depreciated from the time of its construction and the value has levelled off. But it’s going to be disappointing if you plan to claim the depreciation as a tax deduction.
Risks of Buying a New Property
- Cookie-cutter design: This means that the new property looks and is constructed in a very similar manner to everything else out there. Standardisation is the name of the game in construction and building design right now, for a variety of time- and money saving reasons. There won’t be a lot of “character” in the space to attract potential tenants.
Look for ways that you could easily and inexpensively add some unique features to the property. Some ideas might include built-in shelving, high-end appliances and countertops, a walk-in shower, or finished closet space.
- Structural or building problems: Newer isn’t always better. Sometimes, in an effort to save money during construction, contractors will cut corners or even ignore best practices. Once again, this is an important reason to have a thorough inspection done during the house conveyancing. They can make sure that everything about the building is not only “up to code,” but as good as it can possibly be.
- Lower return on investment/capital growth: When a property is brand-new, it is at its peak value, at least for the time being. Unless you’re buying in a market that is expected to boom relatively soon, the home is going to be slower to grow in value. If you’re hoping for a new property, try to find something in a highly desirable development or neighbourhood that is about to be completed (very little new construction remaining). Alternatively, look for a property that is not brand-new, but at least recently constructed. You may get a better deal.
What Should You Do?
How to proceed depends much more on your personal capabilities and intent for the property. With an older property, you may have the opportunity to make improvements or updates to increase its value significantly in the short term, but you must be prepared to put in a great deal of work.
With a newer property, don’t expect to be able to sell it and make a profit any time soon, even within the next few years.
At the same time, the purchase of either type of property can be a wonderful investment or change for your life. Spend your time hunting for the right property, make an informed and careful decision, and hire professionals to walk you through the house conveyancing process. This way, you know that you’ll be happy in the end.