Hey guys,
Investment property question.
What would be good option to buy from below and why ?
1) 20 years Old townhouse for $650K
Land size — 150sqmts
Rental income #$450
OR
2) Brand new townhouse for $750K
Land size — 100sqmts .. (Land size is smaller compared to old townhouse)
Rental income# $550
And why ?
P.S : Both the townhouse are in the same location
Thanks for your inputs .
Is it actually renting for $550?
Approximately from $500 to $550
Thats a big range.. so its vacant at the moment (or under construction)?
Its currently owner occupied, so in that complex,, some are renting out for $500 and some are $550…It's not brand new… its 3 years old
@Abcxyz321: so its not brand new & if not that changes my vote? If brand new you can depreciate fully as ur the original owner. Tax laws changed a few yrs ago and you can only depreciate the items you change on secondhand property purchased after the change of legislation. Are you expecting negative gearing to help you cover costs as the forgone depreciation component will reduce what you can claim
@jug123: Thanks Mate, I didn't reliaze this new rule.. I thought I should be able claim depreciation value…
Also 50% of the claim has to be returned if I sell this after few years…. So its very minimal helpful for me claim deductions…
ex: My mortgage interest could be around $2,300 and other expenses $700 per month. And rental income around $2200,
So net loss is $800 per month.. for a year approximately $10,000. Which If I get tax claim, its going to be $3,000 refund per year…
@Abcxyz321: You can still claim depreciation on secondhand buildings, just not plant and equipment anymore. You claim the construction cost of the structure and the common area structure for 40 years after it’s built, even if it’s second hand. This 40 years resets if structural items are replaced. Any plant and equipment you replace can also be claimed.
You should discuss a major investment and your own capital gains tax implications with a qualified accountant before you buy anything, as your maths above is not accurate and a lot of advice on this forum is based on hearsay and is not accurate.
What's strata like for both
Almost same strata for both
In normal circumstance id opt for old
But advantage of new is yield is slightly better and you'll get more depreciation (I'm assuming all other expenses are roughly the same too)
What you need to consider is whether you think the new will appreciate as much as the old. Even though you're getting the depreciation benefit from the townhouse,it means your building and fixtures are getting old and losing value. This doesn't happen as much as the old because most of the depreciation already happened. Plus old is bigger land.
Tough choice but id probably do new. You might want to consider how much tax benefit you'll get from New vs old to make your decision
depends.
if you are buying as investment, a newer townhouse is less likely to require significant maintenance and you will have sizeable deductions if you get a depreciation schedule (assuming you have taxable income to offset). beware the lemon however a lot of 5-7year old new builds are debt traps with shoddy work that will become apparent right after warranty expires
capital growth wise there's usually more potential in an older block on larger land with a cosmetic renovation. look at strata report closely regarding what you can and can't do and the approval process which can be a bit of a headache
Thanks mate
Townhouse within 20 year probably doesn't have much issues of maintenance either, if it's on a slab, has no leaks or crack then you won't expect much extra unless you want to renovate. If it's owner occupied since then there's less chance it be neglected.
depreciation schedule for the new one? old one will get zilch
Old one has 20 more years of depreciation.
New one has 40 years.
Used one has what’s remaining of the original 40 years on the structure only.
You could invest in something other than homes. Australia would be better off if more people did.
I did some time ago in big company stocks like CBA, BHP and then recession came in and lost lot of money… So house is much safer than other investment options including managed funds etc… all are linked to Index.. which can nose dive if recession strikes again… which may be around the corner if interest rate goes too high or inflation goes too high
You could buy a part ownership of a McDonald's franchise, though you need to pay cash, McDonald's won't accept offers sourced through credit.
ha ha .. Banks don't like me to be owner of mcdy…
The reason rents are so high right now is people weren't investing in houses to rent out. Instead they were getting holiday houses / 2nd homes.
20 years outside/common property maintenance will be double + more than a new townhouse for a start.
not necessarily some small complexes have very low maintenance, if you scrutinize the strata report closely it will tell you how much is in the capital works fund and the balance sheets. something that a newer complex would not have the benefit of because of a lack of history, easy to fudge the numbers when everything is under warranty and new
OLD OLD OLD if you don't want a potential ticking time bomb of defects outside the warranty period
there is so much in the news at the moment about recent apartment builds - this has also killed the confidence in new apartment builds as a result
Yeah, Saw those news.. But I thought Villa / Townhouses should be alright, as they are just standalone and not multi storeyed
really depends on the developer. The issue with new apartment isn't that they are apartments, its that developers have been getting greedy.
A greedy developer isn't an exclusive issue for apartments but for the entire industry.
Obviously an apartment is higher risk vs a low rise or no rise townhouse given the level of engineering involved in each.
But I'd be going for a solid old build with a proven history of no defects, not a new build which isn't quite old enough for defects and maybe a developer who doesn't exist anymore.
If the old one looks old inside, do a facelift renovation after the tenant has been in for 1 lease cycle (for tax purposes as you can't buy and renovate immediately and claim the capital costs)
Get the cheaper one, should have money in the strata fund, and easier to get tenant with cheaper rent, and bigger land.
the new ones are crumbling at a faster rate than the construction companies
using cheap materials, cardboard box homes
Yep I'd be very careful buying anything built in the last 15 years. Especially when there is common ownership involved; just magnifies the risk.
Land increases in value. Buildings decrease in value.
Buy the one with the bigger land area - you will win out in the long run.
Not a townhouse.