There are many issues to consider when buying a home. This is one of the most important decisions investors and homeowners need to make when searching for the right property.
Each option has its own benefits and drawbacks. There are many opinions on which one is best. The most important thing is to keep in mind that it all depends on your priorities as a buyer.
Do your homework if you want to purchase an existing house, either to live in or to use as an investment. These are the top things to look at when purchasing an existing home.
Why you should buy an existing property
1. Purchase price reduced
As new properties are often more expensive than established homes, they tend to be priced lower. This means the developer’s margin and marketing costs are factored into the purchase price. Additionally, newly built homes often receive high demand from first home buyers – because of the many state-sponsored benefits available – and, once borders reopen, foreign buyers – due to Foreign Investment Review Board (FIRB) restrictions. This can cause property prices to rise.
Also, a lower purchase cost can mean lower monthly payments. This can help to reduce mortgage stress.
2. Good location
The location of an existing home is often closer to the city centre. This means that it’s easier to access amenities like public transport, schools, or employment opportunities. Additionally, these houses often sit on a larger parcel of land – meaning they have nice-sized yards – compared to new builds.
3. Potential for value-add
Older properties are “ripe for adding value,” according to some experts. Renovations and improvements to a home can increase the value and rentability of an existing property. You can deduct renovation costs from your tax bill, so you can use the money you save for other financial or lifestyle goals.
4. Greater land value
Experts believe that land is more valuable than buildings over time. Many homes in the inner-city are located in areas where land is very valuable. These properties often have large yards. This is a great advantage for investors as it allows them to maximize land value through sub-dividing.
5. Unique appeal
Many older houses have wonderful features that modern houses lack. There are many factors that make period homes attractive to buyers, investors, and renters. Michael Yardney, chief executive officer of Metropole Property Strategists, says these factors include timeless design, scarcity, being better built, and having “more generous proportions.”
There are reasons not to purchase an existing house
1. Access to grants from the government is limited
The First Home Owners Grant (FHOG) is subject to strict state government requirements. Buyers of established homes need to choose brand new properties – meaning no has lived there before – to be able to access the grant. Even if the property is older, you won’t be eligible for the grant.
However, you can still access other government-sponsored benefits, including The First Home Loan Deposit Scheme (FHLDS), which allows first home buyers to purchase a property for as little as 5% deposit without having to pay lender’s mortgage insurance, and the First Home Super Saver Scheme (FHSS), which lets first home buyers to withdraw a portion of their extra super contributions and use it as a deposit for their first home.
2. Repair and maintenance
If you plan on buying an existing home – especially those where the owners have lived in for several years – you can expect to find some signs of wear and tear. These repairs and maintenance can cost you anywhere from several hundred to many thousands of dollars depending on what type of work is required.
3. Depreciation claims
If you are looking to purchase an investment property, you should consider purchasing an older home. This will allow you to claim a significant reduction in depreciation.
The Australian Taxation Office (ATO) states that landlords may claim depreciation on brand-new or second-hand assets used in residential rental properties. This applies if the property was purchased before 7:30pm on May 9, 2017 and the asset was installed prior to July 2017. Otherwise, you can only claim depreciation on an asset’s purchase price if the asset was brand-new, or if no one had previously claimed depreciation on the asset because the property was either newly constructed or recently renovated.
4. Inadequacy of new features
Some features that you desire may not be available in older properties. For instance, older homes may have heating or electrical systems that aren’t up to current energy-efficiency standards. Investors may lose potential tenants if they do not have the right lifestyle features. This can lead to lower returns and turn them away.
Which lender offers home loans with the best rates?
It is best to do your research if you are searching for a loan to finance your home purchase. You will find that home loans are available from different banks. Comparing interest rates, loan features, repayment terms, and other factors can help you determine the best option for your financial situation.
Fortunately, Your Mortgage gives you a comprehensive comparison of the best home loans available from Australia’s top lenders. Click here to see and compare.