One of the most debated topics in property investing is whether to start your portfolio with a “fixer-upper” or a new property. The allure of renovating a fixer-upper and unlocking hidden potential versus the appeal of modern amenities and lower maintenance costs — it's a dilemma that can really make or break your investment journey.
However, the truth of the matter is, none of the two are more superior to the other and the better option will ultimately boil down to your goal and strategy.
Each has its own disadvantages and disadvantages and requires a different strategy. By considering several factors and conducting thorough research, you can make a more informed decision about whether to invest in an old or new property.
Buying and flipping an old property
Older properties, often referred to as "fixer-uppers," can hold significant potential for savvy investors.
Buying and flipping an old property can be an enticing venture for certain individuals who possess the skills, resources, and risk appetite necessary to undertake such a project. This strategy is primarily suitable for these types of experienced investors but first-timers who have interest and knowledge in construction can also thrive in this option.
Flipping an old property requires active involvement in the renovation process — if you enjoy hands-on work, have a passion for design, and relish the satisfaction of turning a neglected property into a stunning living space, this strategy can be a fulfilling endeavour.
However, it is vital for you to know that flipping an old property requires careful planning, financial resources to cover renovation costs, and a keen eye for profitable opportunities. The process entails thorough market research, accurate financial projections, and the ability to manage potential risks and unexpected setbacks.
Advantages of buying an old investment property
Lower purchase price: Typically, older properties have a lower purchase price compared to newer ones. This can be especially appealing if you have a limited budget or are looking to maximize the potential return on investment.
Established locations: You can buy older properties situated in well-established neighbourhoods with existing amenities and infrastructure. These areas may have a long-standing appeal and a solid track record of attracting tenants, making them potentially lucrative investment opportunities.
Potential for value appreciation: With proper renovations and improvements, an old property can increase in value over time. Investors who can identify undervalued properties and have the vision to enhance them have the potential to earn substantial profits when they decide to sell.
Disadvantages of buying an old investment property
However, old investment properties also come with their fair share of challenges:
Maintenance and repairs: Older properties require more maintenance and repairs compared to newer ones. This can result in higher ongoing costs and potential inconvenience in dealing with renovations or addressing structural issues.
Outdated features: Older properties may have outdated features, such as aging electrical systems or inefficient insulation. Upgrading these features can be costly and time-consuming, potentially eating you’re your budget and overall profitability.
Buying a new investment property
Starting your investment journey with a new property also has its set of advantages and considerations.
If you consider yourself a passive investor who prefers a hands-off approach, then this option is the right one for you. New builds typically come with warranties and require minimal immediate maintenance.
Newly-built properties typically incorporate energy-efficient designs, sustainable materials, and eco-friendly features, making them attractive for investors with a strong focus on environmental sustainability.
When looking for a new property to invest in, it is essential to consider factors such as the location, developer's reputation, quality of construction, and projected rental demand.
Advantages of buying a new investment property
Here are some of the reasons why it might be a better option for you to invest in a new property:
Lower maintenance costs: New properties are designed with modern materials and construction techniques, reducing the need for immediate repairs and ongoing maintenance. This can lead to lower expenses and less hassle for investors, particularly in the early years of ownership.
Attractive to tenants: Freshly built properties often feature modern amenities and conveniences that appeal to tenants. This can make it easier to attract and retain high-quality tenants, potentially resulting in lower vacancy rates and stable rental income.
Energy efficiency: Most of the new housing development and projects are built with energy-efficient features, such as insulation, appliances, and HVAC systems. This can translate into lower utility costs for both the investor and the tenants, providing added value and potentially increasing the property's desirability.
Disadvantages of buying an old investment property
When considering buying a new investment property, you might face these challenges:
Higher purchase price: Newer properties tend to come with a higher price tag compared to older ones. You should carefully analyse the potential return on investment to ensure that the increased cost aligns with your financial goals.
Uncertain neighbourhood: When investing in a new development, it can be challenging to gauge how the neighbourhood will evolve over time. Factors like nearby commercial developments, infrastructure projects, or changes in the local housing market can impact the property's value and desirability in the long run.
Which option is the right one for you?
The decision of whether to go with an old property to flip and sell it or buy a new investment property will ultimately be based on your overall strategy for your portfolio.
Old properties offer the potential for lower purchase prices and value appreciation but may require more maintenance and updates. New properties, on the other hand, provide modern features, lower maintenance costs, and potentially attractive amenities for tenants, but come with a higher initial investment.
Seeking guidance from real estate professionals can help you make the right decision that will align with your goals and will maximise your chances of succeeding in your venture.