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New or existing debate

Discussion in 'General Property Chat' started by Robbo03, 5th Aug, 2015.

  1. Robbo03

    Robbo03 Well-Known Member

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    Hi all,

    I am torn between the above argument. After doing a fair bit of research it seems to be a number of people/companies have differing opinions on whether to buy new of existing.

    I have listed some initial thoughts off the top of my head below. I am really interested in peoples opinions as to 'which is best' and why?

    New - Pro's
    - tenant appeal = solid rents (depending on location)
    - depreciation benefits - minimizes costs to hold
    - minimal maintenance

    New - Cons
    - premium price incl. marketing costs
    - often large distance from major CBD's due to new land restrictions
    - generally in locations without huge incomes/income growth due to being out of CBD's

    Existing - Pro's
    - more possibilities to buy in premium locations
    - can add value
    - can buy into areas with good/increasing incomes
    - not premium price

    Existing - Cons
    - maintenance issues
    - time - if renovating
    - less tenant appeal
     
  2. Raydar

    Raydar Well-Known Member

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    IMO the answer always comes back to your strategy. It will be different for each person. For me, you can't go past value adding.
     
  3. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Depends on
    +1
     
  4. thatbum

    thatbum Well-Known Member

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    Is this really a contentious issue? I haven't heard of any popular or successful strategies that involve buying new.

    I'm pretty sure its a myth that older properties need more maintenance too.
     
  5. Chilliblue

    Chilliblue Well-Known Member

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    Some of the newer construction is more likely to require maintenance than the solid build older properties with all the cheap imported products and poorer workmanship.
     
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  6. Pistonbroke

    Pistonbroke Well-Known Member

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    Become a slumlord - zero maintenance and go for capital gains.


     
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  7. Natedog

    Natedog Well-Known Member

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    I think new vs old is less relevant than the location the property is in
     
  8. Robbo03

    Robbo03 Well-Known Member

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    Thanks for your reply. Would you care to elaborate on why you feel so strongly this way? Really interested to learn from other peoples experiences.
     
  9. Robbo03

    Robbo03 Well-Known Member

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    Agreed. Do you think that it is much more likely for an existing property to be in a desirable location due to a lack of new land in these areas? I that just a really obvious thing for me to say?!?!
     
  10. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    My updated version of the original list:

    New - Pro's
    - depreciation benefits - minimizes costs to hold

    New - Cons
    - premium price incl. marketing costs, often well in excess of real market value.
    - Uncertain rent due to immediate over-supply.
    - Higher turnover of tenants as existing tenants often move to the next new development as it comes on line.
    - Many locations are over supplied with apartments. Keeps down rents and captial gains.

    Existing - Pro's
    - more possibilities to buy in premium locations
    - can add value
    - can buy into areas with good/increasing incomes
    - Easier to determine fair market value due to market not being artificially influenced by developers.
    - Surrounding infrastructure and environment is often more established.

    Existing - Cons
    - Fewer depreciation benefits, but they still exist.
     
  11. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Hi Tom,

    I know there are some people who have the strategy to only buy new, and I'm not going to disparage their approach. The reason I believe why so many people feel strongly about established dwellings is for the exact reasons you posted:

    "Existing - Pro's
    - more possibilities to buy in premium locations
    - can add value
    - can buy into areas with good/increasing incomes
    - not premium price"


    Just those 4 points alone (especially 2 and 4) can have a really huge impact on how fast a portfolio grows and reduce the time it takes to achieve your goal.

    So there is really very good reason why a lot of folks focus on established stock.
     
  12. The Y-man

    The Y-man Moderator Staff Member

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    Additional New Con' s from my experience:

    - Repairs maintenance - I have had to do more bizarre repairs on new than old. While many are fixed under warranty IF the builder is still around), a <brand new whatever> not installed correctly can cause havoc for your tenants. I have a theory on this - I think existing properties have most of their fault discovered and fixed - for a new property you are the discoverer.

    - Emotional factor - nothing worse than a bad first tenant trash your beautiful brand new property or at best treat it like "any other rental"

    - Unforeseen / Unbudgeted costs - you though the curtains were included right? Lights? Door stops? Telephone connection? What need a conduit trench dug? What do you mean the BC fees are 20 x forecast....?

    The Y-man
     
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  13. Robbo03

    Robbo03 Well-Known Member

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    Really interesting replies! Thanks to all.

    Moving on from this debate - when buying existing property interstate do you all use buyers agents? Or do you do your own research?

    If using a buyers agent do you have any suggestions as to good ones, price etc.?

    The reason why I initially started this thread was after reading/watching/listening to a lot of information by two companies - Open Wealth Creation, and, Empower Wealth.

    Open Wealth creation focus on new property in 'infill areas', while Empower Wealth focus on existing. Both provide fantastic information via their free educational services but seemingly focus on very different strategies. Does anyone have any experience on these two companies or have any suggestions about moving forward buying interstate?
     
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  14. wombat777

    wombat777 Well-Known Member Premium Member

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    You can get the depreciation benefits of newish by buying recently renovated. Not to the same level but important to keep in mind.