Why a Brand New Investment Property is

Better for the Investor?

A Brand New Investment Property has significant advantages over an older secondhand property for the investor because it is generally the better financial proposition and it is easier to own.

In simple terms a Brand New Investment Property costs a lot less to own and is easier to own than an older secondhand property becasue a Brand New Investment Property has;

• Lower Maintenance costs;
• Easier Rental & Management;
• Better Rental Return; and 
• Substantially Lower Repayments (up to $7,000 more tax deductions from a new property compared with a secondhand property because of depreciation).

 

Aren't we better off with the higher growth of an inner city suburb?

Most often the answer is NO!

Many investors are lured improperly (from a finacial planning and wealth creation perspective) into purchasing an older inner-city property rather than a brand new property in a new estate because the slightly higher cost of the inner city property is assumed to be offset by a higher growth rate and therefore a better return.  This belief is generally FALSE. 

To understand why a Brand New property is better we need to;

• Take Depreciation into account;
• Calculate the real cost per week of owning the property;
• Understand the Real Investment Return; and
• Make a fair comparison between old and new.

Old Property verses New Property

For this example we will use the figures (from a real investment property) on our page 'How Much Tax Can I Save'.  We have borrowed $350,000 to purchase a $335,000 property renting for $300 per week.  For Comparison we will assume that we have purchased an older house closer to town for the same price, same management, same maintneance, and same rent (in reality the older house would cost more to maintain)

$335,000 House Renting for $300/week

(all interest and expenses included) 

Marginal Tax Rate	16.5%	31.5%	41.5%	46.5%
Cost/wk to Own a -
$335K Old House	$238	$195	$167	$152
$335K New House	$213	$147	$103	$81