This is a tale as old as time itself. Every generation has had to face the dilemma of buying old vs. new, as the pros and cons of either are so tight, it usually comes down to a matter of personal preference or financial incentive. Some of the costs and benefits will apply more or less to your particular intention. Such an important decision cannot be made hastily, so here are a few things you might like to consider.
Old and Dependable
Old properties could be anything from five years old to five hundred, so don’t be put off by the word. The major advantage of them is that you have tremendous bargaining power.
Unlike with a developer, you can negotiate on the price until you’re fully content. Also, you can find people in a bind willing to sell below market value. While this may happen with new builds, you really shouldn’t hold your breath on those.
Golden oldies also come with an added advantage when they are derelict. It means you can buy them cheap, renovate or refurbish them and sell at fair market value or higher. New houses already come with all the bells and whistles, so no value-added advantage. Not only can you flip old homes quickly, but these houses also perform better when the market is slow.
People typically shun new houses when the economy is tight, as they would rather go for something with a reasonable price tag. Another advantage, particularly from the investors’ point of view, is that you have better access to historical and community data.
You can study the housing trends in the area and get a better idea of how much your property could appreciate and the type of people that live there. With a new build, it’s all-new. No history to fall back on, but there is a bright future.
As Good as New
Let’s start with the big draw – tax credits. Although new builds are more expensive on average, you save a good amount on property depreciation.
On top of this, you can claim depreciation on fittings for 7-10 years for items such as your heating system, carpets, air-conditioners, oven and curtains. Add these all up and you could save thousands of dollars every year for the next 40 years.
For old property, you can claim depreciation for the time left until the house turns 40. An added advantage is you get better rent value, as the tenants attracted to your property would be ready to pay a premium. This then becomes more beneficial if you want to sell the house.
As you would expect, a new home would also need fewer maintenance overheads and would be more energy-efficient and sustainable than an old lot. Another thing you get from a new property is peace of mind, in the form of a builder’s warranty. For the next seven years, it is up to the developer to take care of any structural problems. So even if you don’t notice any problem with the house immediately after you’ve taken ownership, you have time to discover the faults (if any) and get them fixed free of charge. You don’t get this coverage with the old property.
Still Don’t Know What to Do?
There is no right or wrong answer. The truth is, if you are looking for a place to live, the environment and proximity to infrastructure would be your primary concern. This could then limit your options, as some house types tend to dominate certain areas.
From an investment angle, it’s more than just a numbers game. Other things to consider include, but are not limited to, location, market trend, land-size, design, historical value or appeal, socio-economic environment, proximity to critical infrastructure, and seller credentials.
Your only safety net is to do your research, speak to specialist advisors, and be willing to wait for the right deal. You should also visit the area and talk to the local real estate agents, and possibly the people in the community.
At the end of the day, you could discover it doesn’t matter what type of house you buy, as long as it can become a beautiful home.
Founded in 1915, the Weidel family of companies has grown to encompass all parts of the residential and commercial real estate markets, including brokerage through Weidel Real Estate, real estate mortgages and finance through Princeton Mortgage Corporation, title insurance through Princeton Assurance Corporation, and real estate education and licensing through the Princeton School of Real Estate.