Established vs New – Which is the better investment strategy?
A common question asked by nearly all of my clients, and for good reason. The simple answer is that the choice depends largely on the individual, your circumstances and your investment strategy. This is why I emphasise to all of my clients that having an investment strategy is crucial and I provide assistance in implementing one as part of my service. Your circumstances and strategy directly impacts the types of properties that I put forward to you as prospective investments.
For me personally, I prefer to invest in established properties and here’s why:
Better land to asset ratio
Generally speaking well-located established properties have larger blocks of land compared to what we see in new housing developments. Remember, land appreciates in value and buildings depreciate in value.
Ability to add value i.e through renovations/subdivision
One of the main reasons why I prefer established over new. With established, we have the ability to add value and realise an equity uplift. Whether it be a simple cosmetic renovation, adding a secondary dwelling or subdividing and building a property at the back of the block, the options are endless.
Established locations
With established properties, we can choose the location we want to buy in. Getting the location right is crucial when investing in property. Most new properties are located in “greenfield” locations, which lack transport links and local amenities. Buying established properties located close to established infrastructure, schools, shops, is my preferred option.
Proven resale value
When buying established we have the ability to compare to other recent sales in the area, and more importantly negotiate on price and conditions. When buying new your negotiating power is diminished (and in some cases non-existent).
New property can form part of your overall portfolio strategy. Buying new can attract some benefits such as:
- Depreciation opportunities
- Tenant appeal
- Lower maintenance
In summary, while my overall preference is geared towards established properties for investing, there are some benefits in buying new on some occasions, and buying both could also potentially help with portfolio diversification.
It’s important to remember to speak to professionals who can look at your individual needs, develop a strategy and provide appropriate advice that best suits you.
Ben Plohl – Founder & Director
BFP Property
ben@bfpproperty.com | +61 434 561 378
**All information published has been collated and prepared in good faith. No representation is given or implied as to its accuracy or interpretation. Please ensure you rely on your own research before making any investment decisions**
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