Before you buy a new investment
Since last month’s Federal Budget, which had the clear intention of encouraging property investors to consider purchasing brand new housing for the rental market rather than utilising existing property, a number of buyers have been talking to us about the availability of brand-new homes, whether actually complete or under construction.
What I want to remind everyone is that whilst this approach can work for some property investors as part of a well-thought-out long-term plan, it’s not a strategy that will work for everyone. In fact, it could be a bad idea for some property investors, and here’s why…
Firstly, a few builders and developers marketing to investors promote the concept of a hassle-free property with no repairs or defects…but this is not always the case. So, you still need to get a full building inspection done before you fully commit.
Secondly, it’s important to understand whether you are looking for an asset with long-term growth potential, or you’re looking for immediate tax benefits. Yes, a brand-new property may offer some stamp duty savings and more depreciation benefits, but a new property is also likely to depreciate in value more rapidly in the first year or two that you rent it out. It’s a bit like buying a brand-new car. The greatest drop in value occurs on your first drive from the dealership to home, because your car is no longer brand new.
Similarly, if you are buying off the plan, you’re buying the promise of what’s to come, rather than a reality that you can touch, feel and walk through. Things can change during the construction phase, from room sizers to fittings and finishes. So, you need to be very sure about the bona fides of the builder/developer you are buying from.
You also need to be very sure about your financing, as lending rules and valuations can change over time as well.
With all this in mind, our strongest recommendation is to get plenty of objective, experienced advice on how to move forward, (which is very different from the message you’ll get from a supposed ‘investment advisor’ who is spruiking a particular product.
Of course, if you’d like to chat with an experienced property professional who is working in the rental market on a daily basis, feel free to give our experts at Barry Plant Thomastown a call on 9466 3233.
Best wishes,
Con Constantinou
Barry Plant Thomastown
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