In the world of real estate investing, the question of whether to invest in new or old properties remains an ongoing debate. Both types of properties offer distinctive advantages. If you’re an investor, it would be ideal to have both in your investment portfolio, however, there are situations that call for a choice between the two.
It is quite difficult to say with absolute certainty which type is the better investment as every property is different. However, you can look at the pros and cons of new and old properties and use this information in coming up with your decision.
Pros and cons of an old property
Older properties have proven resale value, which means that you can have a much clearer idea of what your property will be worth in the future based on historical data. In newer properties, there’s really no assurance whether prices will shoot up or crash down.
Old properties also hold a unique charm that would take new properties years to recreate. Depending on when the structure is built, an older place can have historical significance and quirky details that can attract potential renters and buyers.
Another advantage of old properties is that they are typically priced lower than new properties in the same area. If you are targeting an area or a district that is highly in-demand, buying an old property that suits your budget can be a smart investment.
With an old property, you can renovate depending on your vision and your budget. You can perform small renovations or do a complete fixer-upper to make it ready for lease or resale. You are not trapped with fancy interiors or expensive features that come with new properties. Many properties can be restored with inexpensive cosmetic makeovers and there are improvements that you can even do yourself like plastering a wall or adding more storage.
While the historical value of an old property can be an advantage, it can also serve as a limitation. There are places wherein certain regulations are in place concerning properties with historical significance. In the UK for example, listed properties that hold national, historical, and architectural interest are categorized into Grade 1, Grade 2*, and Grade 2 buildings with 92% of these listed buildings falling into the Grade 2 category. If you own one and you are planning to renovate, you have to check first what can’t you do to a Grade 2 listed building or else, you could face serious penalties.
Another common issue with old properties is that they may have structural issues. If a property has structural problems, it could cost a lot to fix and may not be worth your investment. For properties that are very old, you should also check for the presence of hazardous building materials like lead or asbestos.
Old properties also typically require more maintenance than newer properties. If you are planning to rent out your property, make sure that you’re ready to deal with calls from your tenants regarding usual wear and tear issues associated with old properties.
Pros and cons of a new property
If you want a property that is ready to move in which you can rent out ASAP then buying a new property will be a good idea. This is a better choice for investors who do not have the time or the energy to deal with renovations and repairs.
Investing in a new property is a more practical choice if you want to earn money from it from Day 1. This is because new properties are more attractive to tenants who also want to avoid the headache of maintenance issues.
New properties would often have innovative features that many modern homeowners are looking for such as security systems, home automation systems, energy-efficient appliances, solar panels, and other sustainable materials. With these types of properties, you can potentially charge higher rent and earn more from your investment.
All the convenience, however, can come with a hefty price tag. In many cases, you are forced to pay higher because of features you may not necessarily require. You also do not have that much flexibility to change a lot in the property because renovating a new property is not very practical.
Another disadvantage of a new property is that they are often located in new areas with little infrastructure and are far away from downtown areas. If this is the case, it can make it difficult to rent or resell. If a new property is an apartment or townhouse, an oversupply of similar properties in the same area could also cause rental prices to go down due to oversupply.
New property versus old property: Weighing your options
The decision on whether to buy an old or a new property should never be dependent on the age of the structure alone. When looking for a property to invest in, you should also consider other important factors.
The area where the property is located should be a priority. If you are buying a residential property designed for families, is it located in a safe area near schools, public transportation, and other services? If you are looking to invest in a commercial property, check whether similar properties in the area are doing well.
Another consideration is checking whether there is a demand for that property. New properties are not always more in demand than old properties. For example, an older townhouse in an exclusive area would fetch a higher price than a fancy condominium in an underdeveloped community.
Lastly, you should consider your financial goals. All investors want to get the maximum return from their investments, however, not everyone shares the same timeline on how to achieve this. Some properties will be more profitable in the short-term as you can lease or resell them immediately at a high price. These properties are typically more expensive to buy now. If you are willing to wait, you can also go for a lower-priced property, which may take years before it appreciates.
Making a smart investment
The choice between an old property or a new development is not always an easy one to make. Even if the two properties are side by side or even if they share the same price, knowing with certainty on which one to go for can still be confusing. You still have to practice due diligence and do your homework to make sure that you are making the right choice.