All other things being equal, does a new build rent for more than an updated older house?

Discussion in 'Development' started by wylie, 22nd Oct, 2015.

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  1. wylie

    wylie Moderator Staff Member

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    I'm keen to hear from anyone in Brisbane who holds both a new build and an older style but renovated property as to whether one gets more rent over the other?

    I have a friend who has two new builds at Cannon Hill renting for $750 and $850 per week, and another friend who has a 1930s house in Coorparoo, completely renovated, same spec as the new build, getting $710 per week.

    I have researched "rented prices" for both types and it seems that a new build rents for more than a renovated Queenslander. I'll do more looking, but so far, the new build seems to demand a premium, even in the same suburb.

    Does this hold true for any owners holding both (or having close knowledge of rent prices for both styles). I'd love to hear from any PMs reading this, or anyone who currently holds both styles of IP?
     
    wylie, 22nd Oct, 2015
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  2. thatbum

    thatbum Well-Known Member

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    I don't know the specific areas you're talking about - but wouldn't it be a normal function of supply and demand?

    I imagine some peeps would prefer the renovated Queenslander, while others prefer a new build and all the niceties that go with. It then comes down to which are harder to come by for tenants in a given suburb or location.
     
    thatbum, 22nd Oct, 2015
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  3. wylie

    wylie Moderator Staff Member

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    You are correct. I'm considering whether to build under a currently owned IP in Coorparoo to make it schmick or sell and buy a newly built (or build new ourselves) in Cannon Hill. We have to shift the Coorparoo house on the block to allow reconfiguration of the block for the DA. We can simply lift and batten it in (ballpark $100k to lift, slab with plumbing ready for downstairs work, fence, new stairs x 2) and rent it for $600 (currently $580) or spend another (guessing) $150/200K (build under, four bedrooms, 2.5 baths, update everything) to take it to the next level and probably still only get $700 per week (maybe a little more). It is a lot of spend and the return doesn't warrant it at those "guestimates".

    If we do this, I'd also like to reconfigure the layout because lifting will give city views (unlikely to be built out). Right now, the views are from bedrooms, and that is worth changing the layout for, to make that side living areas. It costs more though to do that. We'll not likely get more rent for a city view, but resale would be better (on which we pay CGT). It is a balancing act, what to spend, what extra rent we get, what tax we pay on sale down the track. I have lots of numbers to crunch.

    I have to temper my desire to make it the best it can be with the cost to do so, against just optimising the rent for the lowest cost, but preparing downstairs for building under by us or next owner.

    In Coorparoo, new builds are not common so I cannot easily compare an older house to a new build. What we lose in selling fees in Coorparoo and purchase costs in (say) Cannon Hill might mean we are better to avoid those fees and take slightly less rent. Bird in the hand I guess.

    There are plenty of new builds in Cannon Hill and the rents are high. It has just got me thinking.
     
    wylie, 22nd Oct, 2015
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  4. standtall

    standtall Well-Known Member

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    New builds are not bad from cashflow point of view once it's built plus a limited number of investors are doing new builds (lack of time, ability to forego cashflow while being built).

    In general, once ready a new built home will have gone up in both rental yield as well as equity.
     
    standtall, 22nd Oct, 2015
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  5. beachgurl

    beachgurl Well-Known Member

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    I have a new build on the north side and the agents have absolutely no clue of what it could rent for. I'm getting appraisals between $530 and $650 per week. Some are trying to compare it with older properties.

    The top end of the Coorparoo rental market looks quite flat. I'm currently doing the numbers on a knockdown rebuild that will have city views but the rents seem to be all over the place, both renovated and new, with some sitting on the market for quite a while.
     
    beachgurl, 22nd Oct, 2015
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  6. Art Vandelay

    Art Vandelay Well-Known Member

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    I imagine you would get significantly more depreciation on the new build - higher rent and better depreciation sounds like a win-win.
     
    Art Vandelay, 22nd Oct, 2015
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  7. jodes

    jodes Well-Known Member

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    Although this doesn't directly answer your question and I am quite impartial to an old house (they don't make them like they used to!) In ten, twenty years that new build is going to look rough (think about how 70s, 80s and even 90s houses look right now!) but hopefully an older one will retain its "classic" presence- high ceilings, detailing, individuality etc.
     
    jodes, 23rd Oct, 2015
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