Stepping Stone Whitepaper
rev Nov 2013
Old vs. New: there is more to it then you think! Overview: Owning investment property is a business, and at the end of the day it needs to make a profit for its owner. Like running a business, the owner needs to balance managing risks vs. creating wealth. The risks with NEW are manageable and mostly known vs. those of OLD which have many unknowns, and can’t be fully known prior to taking ownership. OLD vs. NEW? This a decision each investor needs to consider based on their own tolerance for risk and how they see the upside.
Pros:
Cons: Old Property
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Possible to add value by renovating. Lower purchase price for OLD compared to NEW of the same size, location, etc.
New Property •
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Rent demand for NEW property is far greater. NEW is more likely to have less vacancy and usually attracts a better standard of tenant. NEW is more sort-after by tenants. On a square meter by square meter comparison, NEW rents for more. Depreciation credits for NEW far outweighs the price premium NEW has over OLD. Repairs and maintenance expenses are low and predicable for the first 10 years. NEW property attracts better tenant due to the higher rent than the OLD property. Lower stamp duty on NEW House & Land investments.
Old Property •
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OLD has many potential unknown maintenance issues. Extensive due diligence and building reports are required prior to purchase. With apartments special levies can be sprung on owners without any notice. Major repairs may have potentially been overlooked and not yet recorded at body corporate meetings. Once a special levy is called, owners have no option, but to pay the levy as directed. No building depreciation (Div 43) for property built prior to 18/7/1985. OLD properties rent for less, and tend to have a higher vacancy rate than NEW.
New Property • •
3% – 5% more expensive than an OLD comparable. With apartments there can be many similar properties available for rent at the same time upon completion.
BUYER'S AGENTS & PROPERTY INVESTMENT ADVISORS SteppingStoneProperty.com.au o: 302-306 Bong Bong St, Bowral, NSW
Stepping Stone Whitepaper
rev Nov 2013
Depreciation by Year: New Property Type
Cost Price
1st year
2nd year
3rd year
4th year
5th year
6th year
7th year
11-40th
1 Bed Unit
$380,000
$11,000
$9,000
$8,000
$7,000
$7,000
$6,000
$6,000
$4,500
2 Bed Unit
$450,000
$12,000
$9,000
$8,000
$8,000
$7,000
$7,000
$6,000
$5,500
3 Bed Unit
$650,000
$15,000
$12,000
$11,000
$10,000
$9,000
$9,000
$8,000
$8,500
Townhouse
$450,000
$13,000
$8,000
$7,000
$7,000
$6,000
$6,000
$6,000
$5,500
4 Bed House
$420,000
$11,000
$8,000
$7,000
$6,000
$6,000
$6,000
$5,000
$4,500
Depreciation by Year: Old Property Built 2000 / Purchased in 2013* Approximate Type
Cost Price
1st year
2nd year
3rd year
4th year
5th year
6th year
7th year
11-27th
1 Bed Unit
$178,000
$1,500
$1,500
$1,500
$1,500
$1,500
$1,500
$1,500
$1,500
2 Bed Unit
$210,000
$1,800
$1,800
$1,800
$1,800
$1,800
$1,800
$1,800
$1,800
3 Bed Unit
$310,000
$2,800
$2,800
$2,800
$2,800
$2,800
$2,800
$2,800
$2,800
Townhouse
$210,000
$1,800
$1,800
$1,800
$1,800
$1,800
$1,800
$1,800
$1,800
4 Bed House
$196,000
$1,700
$1,700
$1,700
$1,700
$1,700
$1,700
$1,700
$1,700
*Assuming the purchase of the “Older” Property was in 2013 for a property constructed in the year 2000. Depreciation claims are specified as year 1 being this year and year 2 being next year etc. *Depreciation is indicative only and is calculated using the diminishing value method.
BUYER'S AGENTS & PROPERTY INVESTMENT ADVISORS SteppingStoneProperty.com.au o: 302-306 Bong Bong St, Bowral, NSW