Would you buy a brand new/newish property to live in, considering it's high depreciation?

Hi,

I hear that one of the benefit of buying a new investment property is that this will provide a better tax deduction i.e. depreciation.

What about PPOR though? What are the Pro's and Con's of buying a new property to live in for the next 5~10 years? (aside from the "good" feeling of living in a shiny brand new/newish home!)

Would it be a better bang for the buck to aim for properties built at least 5 years ago, so that you don't pay the high price tag for the brand new/newish properties? (kinda like buying a new car which depreciates fast over the fist few years)

Thanks for educating me

Cheers,

 

If PPoR, buy whatever you like and be proud of. You only live once... The worst regret is I should have bought that and l would be happy.

 

No not necessarily, you will have to pay stamp duty if you by an existing. Before the boom this year you could build cookie cutters cheaper than buying existing property. You could buy flash architect custom designed house's much cheaper than you could build them probably still can. It depends. You can spend 600k and get boring generic new crap, or spend 900k and get and get something that costs $1.2m to build and already profit from the depreciation.

 

Would I? No
Does this mean it's always a bad thing to do? No, absolutely not!

I don't think you should care too much about the value of your PPOR anyway. Particularly not if it's your forever home.

 

That would be from poor location and buying where there is inferior tenant pool. My tenants keep the house pristine. If they dont, tell them to P Off. Just had one valued last week it has increased 50%. Also built cash flow positive properties(270/week) sold 5 years later with a cost base of 180k and sold for 235k, the depreciation was 30% of CG. Yet to buy an old $170k property spend 10k on stamp duty you would have got a far inferior property and still had the expense of spending on the depreciation that the previous owner claimed.

 

We built our house, a custom build. It's got everything we want and we love it.

I don't see any benefit to buying a newish house over an older one for your PPOR. If it's the house you love, then it doesn't matter.

 

A : Yes I would buy a new house. I wouldnt be buying a new apartment however. I would also consider a well renovated existing property as it may have just as much depreciation anyway. I might be less inclined to buy a run down property as an investor as it isnt generating a benefit quickly.

Some IP owners dont spend money on maintenance. That is worse and helps property to gradually decline in condition. With no deduction benefit.

 

I understand the appeal of a newish property.

However as an investor, you should probably avoid these. As an investor, depending on the asset selection of course (and there are exceptions), you will get less capital growth from a newer property assuming we are talking about apartments.

Instead, buy something older in a good location, and then renovate it. You will manufacture some capital growth, plus you will also get your depreciation deductions.

Footnote: don't invest for tax advantages. Investing to get depreciation benefits is like investing to get negative gearing benefits. These should be welcome but incidental. Focus on intrinsic value and overall desirability etc.

 

We renovated a knockdown property while we were living in it when we had a new baby. Yucky, I wouldn’t recommend it!! All our income went on fences, repairs, etc. The next house was fairly new, large and decked out with luxuries, around 6 years old and fully renovated. Unfortunately Previous owners realised they couldn’t have kids so renovated the house as a hobby. They probably over-capitalised. It was fantastic to live in though with a young family. No maintenance!
Edit: My neighbour built not long after me. She’d looked at the house when it was for sale but bought the block of land next door instead. It cost her $90,000 more to build new. Plus it was a cheaper quality and smaller home and block. It had no landscaping included like built in BBQ, with sink and main gas connection as well as garden beds. So I’d recommend buying established rather then brand new.

 

I'm a firm believer that you should invest well enough, and apply yourself to your career in such a way that your home should be an emotional choice not a financial one.

You need a sanctuary, and it's hard to do that when you are trying to min/max every decision when trying to relax at home.

 

Well said.

 

I will share what have seen from my friends and people in the community and I stand to be corrected on those:

1. Few friends bought land in regional areas of Melbourne....land was around 120K, 500sqm. Land took 2 years to title and after titling (early 2021) the value had doubled.

2. Other friends bought land in the new estates around Melbourne in all directions i.e Werribee, Sough Morang, Mernda, Doreen, Clyde, Clyde North. For example in Clyde North- less than 5 years ago, home and land packages were going for less than 500 (500 sqm land, double storey). Those same houses, depending on the quality are going for at least 800k with a few sales exceeding 1M.

Isn't that growth good? Waiting for the pros to help here...

 

This line typically gets peddled by Spuikers trying to sell House and Land packages to the uneducated investor

 

1. Do not buy a new property just for depreciation. Believe me, just like Negative Gearing, Depreciation means that you are LOSING money.

2. Buy your PPOR according to the property cycle at the time. We built our current home (a very long time ago) in a new suburb for no more $$$ than a dive of an old established house in the adjourning suburb would have cost. The land was very cheap but had doubled in value within twelve months of purchase. Today may or may not be the same. It also depends where you are buying land - The situation in Sydney is not the same as say Perth or Darwin.

 

Buy the house the speaks to you and suits your lifestyle for the next 5-years.

Stuff whatever ‘image’ it portrays.

I live in a brand new ‘high end’ estate.

It’s FULL of knob shiners.
All trying to outdo the next person.


I’d sell up and leave but the location and lifestyle is exactly what we want and need for the next 5-10yrs.

After that.......


Will

 

problem with investor tailored new units are that when they sell they keep body corp very low but in 3-4yrs they double or even more. any tax benefit from depreciation is quickly eroded by these.real costs.

i think brand new house or freehold townhouse maybe betyer

 

No

 

Agreed.
When I prepare sinking fund forecasts for near-new bodies corporate, they are often concerned by the sudden jump in annual contribution requirements.

And that’s purely because they haven’t been contributing enough money to-date.

 

We built our ppor - we knew that building an overcapitalised dwelling in a newish regional suburb was not a good financial move. if we built a median specs duplex on our 800sq plus land, we would have made a decent profit which would fund our retirement quicker. but its our dream home and we loves it. like others said, you only live once.