Is it better to buy a new or established investment property?

Property investors often face the dilemma of whether to buy new or old. We take a look at the major considerations for both new and established dwellings to help you make an informed decision.

It’s the old versus new debate. Are you better off investing your hard-earned cash into an old property that offers value-adding and equity building potential, or a brand new property that guarantees higher tax and incentives and better quality tenants?

While the value of a property is influenced by several factors-- including location, size, aspect and amenities --the decision to buy a new or established dwelling is just one of many issues to consider when buying an investment property.

We break down the key considerations when weighing up between new or old.

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Buying a new property

New investment property

Pros

  • Depreciation benefits. If you’re an investor, the newer the property the higher the amount of depreciation available to you. You can deduct 2.5% on the property itself for 40 years which can lead to a significant tax deduction. Appliances such as air conditioners and dishwashers generally have a high rate of depreciation. For more information about the tax benefits available to you, visit the Australian Taxation Office (ATO) website.
  • Tenant appeal. Typically new dwellings are perceived to be higher quality which means you may have greater tenant appeal. This is because tenants will be attracted to modern appliances and technologies such as reverse cycle air conditioning and will be prepared to pay a premium. The ability to attract high quality tenants could mean that you lower the risk of untenanted periods for your investment property.
  • Protection. Builders of new properties in Australia are required to take out home warranty insurance which protects you in the event of a major building defect.
  • Low maintenance. When you buy a new property, you can benefit from the convenience of not having to spend money on repairs or ongoing maintenance.
  • Security. Most items for a new property are under warranty which means you can minimise your ongoing costs as they are covered by builder’s warranty insurance.
  • Government incentives. There are stamp duty concessions and grants available for first home owner grants when buying off the plan which could significantly reduce your upfront and ongoing costs.

Cons

  • Less affordable. Depending on the location and property type, new dwellings are generally more expensive than established dwellings which could mean that you struggle to meet your repayments. In addition, new properties often have high strata fees associated with maintaining communal facilities such as gyms and pools which could harm your cash flow.
  • Limited value-adding potential. There is little opportunity to add value to the property once you’ve purchased it so it may take longer to achieve capital growth.
  • Greater market risk. New properties are often the first to see price declines when the market softens, while established properties will either maintain their price value or experience a minimal adjustment.

Buying an old property

Established investment property

Pros

  • Renovation potential. A major advantage of buying an established property is that you can renovate and add value to the property which can boost your equity. These renovations are often tax deductible.
  • Affordability. An established property is generally more affordable than a new property which means that you may be at less risk of facing mortgage stress levels. Enter your details in the calculator below to see how much you need to earn to live in the suburb of your choice.
  • Property history. Historical data about the property will give you an idea of how the property value has changed over time which can help you make an informed decision.
  • Negotiating power. When you buy an established property, you have the ability to negotiate for a fair price. Vendors of established properties often have a motivation to sell relatively quickly so you can use this to your advantage to negotiate a bargain.
  • Capital growth. Generally a well-bought established property will outperform the averages over the long term and experience high capital appreciation which will benefit your long-term cash flow.

Cons

  • Maintenance. An older property may require upgrades and repairs due to wear and tear on the property over time. Not only could this eat into your profit, if a major renovation needs to take place, this could mean that you risk loss of rental income if tenants need to temporarily vacate.
  • Lower rental return. If the property is run down, the rental return will typically be lower compared to a new property.
  • Less appeal. Established properties typically have less appeal than new properties as they may have an outdated design.

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Rates last updated December 12th, 2018
$
Loan purpose
Offset account
Loan type
Repayment type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.99%
3.99%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.89%
4.24%
$0
$0 p.a.
80%
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
3.84%
3.91%
$0
$0 p.a.
80%
Get instant online approval and flexible repayment options with this fixed rate mortgage for investing.
3.94%
3.94%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate loan to fund their property portfolio. Take advantage of split and redraw facilities.
3.79%
3.82%
$0
$0 p.a.
80%
An essentials variable investor mortgage with a high borrowing amount so you can fund a large purchase.
3.99%
4.13%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with no application fee.
3.98%
5.01%
$0
$395 p.a.
90%
Fix the rate on your investment property for 2 years with this competitive home loan package.
3.74%
3.79%
$499
$0 p.a.
80%
Competitive variable investor mortgage to fund your property portfolio. You can add a 100% offset account for just $10 a month.
4.05%
4.22%
$0
$10 monthly ($120 p.a.)
90%
Lock in your interest rate on your investment property for 2 years. Earn Velocity Frequent Flyer Points.
4.03%
3.92%
$499
$0 p.a.
80%
A competitive 3 year investor rate with principal and interest repayments. Optional offset account with a $10 monthly fee.
3.91%
3.92%
$0
$0 p.a.
80%
Investors can go from application to approval in as little as 20 minutes with this innovative online lender.
3.98%
3.98%
$0
$0 p.a.
70%
Investors can get a 100% offset account and a low rate if they have a big deposit. 100% online application process.
4.09%
4.87%
$0
$395 p.a.
90%
Buy your investment property and set your repayments for the first year. Available in QLD, NSW and ACT only.
3.99%
3.94%
$0
$0 p.a.
80%
Buy an investment property and enjoy the certainty of a 3-year fixed rate with interest-only payments.
4.09%
4.40%
$0
$0 p.a.
70%
Forget about rate rises for two years and minimise your investment repayments with this interest only mortgage. Requires a 30% deposit.
4.54%
4.59%
$600
$0 p.a.
80%
An investment loan for new Heritage Bank customers. Low fees and interest-only repayments.
3.97%
3.99%
$0
$0 p.a.
80%
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
4.29%
5.33%
$0
$395 p.a.
90%
Lock in a competitive investment rate and combine your loan with a credit card and transaction account for extra savings. Package fee applies.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.29%
4.31%
$0
$0 p.a.
80%
Investors will pay no application or ongoing fees for this interest-only loan.
4.18%
4.18%
$0
$0 p.a.
80%
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
3.89%
3.91%
$0
$0 p.a.
80%
Investors can go from application to full approval in as little as 20 minutes with this innovative online lender.
4.29%
4.31%
$0
$0 p.a.
80%
A simple, variable rate investor loan from an online lender that keeps fees to a minimum.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.90%
4.31%
$0
$0 p.a.
80%
Lock in a fixed rate for 5 years and make interest-only payments with this investment loan.
4.24%
4.68%
$0
$0 p.a.
90%
Fix your investment repayments for 1 year. You can get this loan with a 10% deposit. Available in QLD, NSW and ACT only.
4.64%
5.39%
$0
$395 p.a.
90%
Pay off your investment knowing your exact repayments for the first 4 years. Get this loan with a 10% deposit.
3.99%
3.92%
$0
$0 p.a.
80%
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender.
4.29%
4.27%
$0
$198 p.a.
70%
Fund your property portfolio with this fixed rate mortgage which includes a 100% offset account. 30% deposit required.
3.89%
3.91%
$0
$0 p.a.
80%
Lock in your interest rate for 2 years and enjoy flexibility, an optional offset account and a fast online application process.

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Belinda Punshon

Belinda is a journalist here at finder.com.au. Specialising in the home loans and property sections, she is passionate about helping Australians improve their financial wellbeing.

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