Imagine being close to owning your home worth $400,000 and now you’re looking to start your property investment portfolio.
In your head you’re thinking a nice little flat or older townhouse worth around $300,000. But you’ve been recommended to consider building an investment property worth $500,000. The immediate response is often an emotional one: “I don’t want my tenants to have a better home than my own!”.
Lose the emotion
The reality is however, as a true investor, you need to separate the emotion and make a business decision on what will provide the best return. I’ve spoken with plenty of investors who chose the older flat as their first investment, and found that this type of property comes with its own separate stresses. Increased maintenance, little or no depreciation, poorer quality tenants to name just a few.
What’s the alternative?
By constructing a brand new property as your first investment, you will maximise the depreciation of the property and therefore maximise the tax effective nature of the investment. New properties will also deliver little to no maintenance and if there is a maintenance issue, its often covered by the builder’s or product warranty. Building new makes sense. It’s a better business decision.