Making a decision as an investor for your present living or investing situation, such as bringing in another property to boost your asset portfolio is a challenging decision.
Buying existing property, renovating or building afresh is quite a headache and tiresome, that is why we have this piece to offer you some tips to help make the whole process more comfortable for you.
To generate more returns, you have to consider whether you are going to purchase then sell it later or buy it then hold it.
Whatever the choice you pick between the two you have to keep in mind other factors such as renovating, building new or buying existing property.
As you go through your decision making process, consult experts to guide you through.
Purchasing Existing Property
Pros
- More space for less money – although all the area may not be habitable immediately, the cost for the physical building (as a percentage of the whole property value), purchasing existing property typically costs less than building a new house. Building a new house will take longer and so you have to factor in holding costs during construction also.
- Location – established property are at times situated in older neighborhoods or an established urban environment. Moreover, older houses may have some “old fashioned” charm on the interior, for example original tiling or crown moldings and other extras that are not typically standard in new dwellings.
- There is likely easy access to social amenities such as parks and recreation centres because you are in an established region. On occasion, building new will draw you to outer fringe areas which may have a less established local neighborhood.
- Buying an established property means you can use it immediately to make a profit. If you rent it right away, you can start getting a return quicker than on a renovation or new build.
Cons
- Some established property may have outdated appliances and features. This will add cost since you will ultimately have to do repairs or replace some of them.
- Established homes could run you into unexpected challenges such as unscheduled maintenance and repairs.
- In general terms, the older the property, the lower your rental return, therefore rendering a less yield than many new builds will deliver.
Building New
Pros
- When you build a new property, you become part of a new community that has sound infrastructure and therefore attracts more rent.
- Another distinct advantage of building a new house is everything will be new. Forget about the hidden repairs or outdated appliances. This improved your cash flow.
- Building a new house comes with some incentives like the first home owner’s grant (this applies only to new constructions in a lot of Australian States), lowered stamp duty is another benefit.
- You will also be able to manage the cost of building and save more.
Cons
- It takes time to build. It could take you close to a year to build a new house.
- There could be hidden risks and other issues which could pose challenges as you build.
- There are other factors which could be a headache like choosing color, design or layout.
Renovation
Pros
- Just like the existing property you can make returns on your investment in a short time. This will depend on how long the renovations will last.
- You can also redesign the property with modern appliances and features to attract more rent. You are also able to control the costs.
- Location of the property may attract more rent as compared to building new.
Cons
- Unless you are an expert, sometimes it is difficult to renovate or own property that needs a lot of repairs.
- The time for renovation may blow out.
- Some houses may require significant renovations which were earlier hard to detect.
Conclusion
As an investor, you have to look out what suits your profit-making strategy. This is a business and not a get-rich-quick scheme, you will have to carefully examine the costs to reduce the your downside risk.