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In This Video:

00:19 Why should you Buy New Property vs Old Property?
01:55 Depreciation
03:06 Brand new properties attract better tenants

G’day there. Daimien Patterson here from Integrity Property Education. If you’re looking for property investment information, property investment advice and property investment strategies, you’ve come to the right place.

Why should you Buy New Property vs Old Property?

This week’s blog: Why should you buy new property versus old?

Okay, first of all most property investors, the biggest mistake they make is they sell. Now, rule number one of property investing I think is never, ever sell. Most people will sell because they don’t understand finance, they don’t understand how to get the money out of their property. Once you understand the key point of difference between an investment property and your own property is that you’ve got a rental income coming in and that rental income will continue to come in, as years go by, it will go up. So if you want to get money out of your properties, you can actually use that surplus rental income, maybe take the cream off the top or use it to refinance and pull lump sum of money out of your investment properties. Once you get that concept, you’ll then understand that you should never, ever sell. If you never going to sell then you’ll never going to get taxed. If you sell, you get taxed on capital gains tax, you get disposal cost for selling the property and you get acquisition cost to buy its replacement. So once you understand that they you should understand first the importance of buying brand new property. If you’re going to hold that property for the rest of your life, the building code in Australia says you got to build a house to last 25 years. So if you’re buying old properties, what’s going to happen is the maintenance cost are going to go up, up, and up and they’re going to ruin your cashflow for your property.

So the first reason why you should buy new is because you’re never going to sell and you need that property to last as long as possible and they’d be low maintenance throughout that time.

Depreciation

The second reason why you buy brand new is depreciation. Depreciation is the secret source of property investing. The key difference about depreciation versus all the other expenses you can claim is no money leaves your bank account. Sure, you can claim interest on a loan but your money has to leave your bank account for you to claim a third back on tax. The beauty of deprecation is on a brand new house, you can claim ten, even fifteen grand in depreciation but no money ever left your bank account, so you’re getting basically a free hit and a free claim. Reason number two for buying new: maximise the depreciation claim upfront. But there’s more reasons why you should buy brand new: you get a builder’s warranty for the first six months, and you get a structural guarantee in some states, like Queensland for example, for six years. From a risk management perspective, if you were to buy a house that had problems and were structurally unsound, it could ruin you because once you’re the owner you’re going to be responsible for fixing it. If you buy brand new, you’ve got a massive, very beneficial risk management strategy in the builders warranty and structural guarantee. So you’ll be mad not to do it.

Brand new properties attract better tenants

The last reason why you should buy brand new is because brand new properties tend to attract the best tenants because brand new properties are always in the middle to higher middle part of the market, that where professional employed, full-time, good income workers are and they’re the people you want renting your properties. So remember, why buy brand new? One: longevity in your portfolio. Two: depreciation. Three: low maintenance cost. Four: good tenants. Give: Structural guarantees and warranties. So, those are five reasons to buy brand new.

That’s it for me this week. Until next time. I’ll see you later.

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