In a global recession market, it can be difficult to know where to invest your hard-earned cash to the best benefit- have you considered building an investment property portfolio? There are many benefits to investing in new properties. Property has always been a traditional part of the well-balanced portfolio, and also a safe-haven investment less likely to react with volatility, so it provides valuable diversity and a form of failsafe against stock market fluctuations. Additionally, here in Australia there are great tax-saving opportunities to be taken advantage of as well. Be sure, however, to seek sound property investment advice to make the right choices.
Should I go old or new?
The benefits of any property investment aside, the question of whether you should risk money on a new development or opt for an older, established building can be a pressing one. After all, making property investment work for you requires proper research and planning. You have to pick the right type of property in the right areas. There can be considerable advantages to buying a new property:
- A lack of tenant history. Believe it or not, this can be a considerable asset to a property owner. You may even be able to attract a higher class of tenant with a new building then with an older structure, but you certainly will be able to choose them yourself, and not be stuck with lemons left over from the previous owners.
- Choice of area and markets. You can choose the type of building and the area and market you wish to sell it too- you can’t be so choosy with an existing structure.
- You can be an organic part of the building process- and make sure that the contractors, developers and builder used are honest, capable and trustworthy.
- There’s considerably less likelihood of illegal structural errors [under modern building codes] on a freshly built property. Additionally, renovating the aesthetic appeal or being forced to upgrade the basic infrastructure of an ailing old building will leave you at risk of overcapitalization. It’s very easy to spend more on a renovation then the actual capital gain you can expect in return.
- New properties enable you to maximize your tax deductions and savings.
A little more about tax and investment property
Never under-estimate the value your investment property can have for tax purposes. Not only are certain expenses- such as those made for the property- tax deductable alongside other related costs like insurance, you may be entitled to depreciation options for your purchase price. You’re even allowed to compensate for negative gearing by deducting the difference between your rental income and cost! And a new property, versus an established one, will enable you to most capitalize on the available tax breaks, particularly in the area of capital gains- without a previous owner having already utilized them.
Remember, here in Australia, there is another great tax benefit to buying investment properties in Brisbane or elsewhere. SMSF property investment, or Self-managed superannuation funds, work like paying into industry funds or wraps- but it is self-run. You have the choice of investment. It also has the distinct advantage of not leaving you as out-of-pocket as with direct property investment, as the fund is responsible for costs. More to the point, they have excellent tax benefits. Your broker or a good buyer’s advocate can offer you more sound property investment advice on utilizing smsf property investment.
All in all, the multiple benefits of investing in new properties can be summed up as reducing the potential for unpleasant surprises- you know what your structural stability is, where your market is, who your tenants are, who constructed the building and who will be using it. In addition to making the most of those tax breaks and other benefits of investing in a new property, you’re buying peace of mind.