When? Where? Old or new? Three key questions about property investment

I did a radio interview this week and was asked to answer three seemingly simple questions:

- Should an investor buy old or new property?

- Where should they be buying?

- When should they be buying?

Simple, right? Well, not really. The three questions above have endless answers but I’ll run through what I answered.

Should you buy new or old property?

Neither. My answer was to build. Right now the NSW government wants to stimulate construction and is offering a $5,000 incentive to build.

If you buy the right land at the right price, then you can create equity even on a single house build. But if you build a duplex or dual occupancy on that land, then the equity created can be much more.

Just this morning I was offererd a duplex site that was only $160,000. To build a three-bedroom duplex will cost about a third more than a single four-bedroom house. But the end value of the two dwellings will be so much higher. That is how Property Bloom creates equity for clients.

Where to buy?

Well, of course, that depends on two main things.

Do you want negatively geared property or neutral/cashflow positive property? An investor on a higher income paying lots of tax may be more interested in buying in the capital cities and will more than likely end up with a negatively geared property.

If it’s a new apartment or house, then they will also benefit from strong depreciation benefits. An investor looking to boost their income with the property investment may find a more cash flow positive property in regional areas.

In general, yields are higher in regional areas compared to capital cities. Of course, you can build in regional areas and create both a high depreciating dwellings with strong yields and benefit from cashflow, equity creation and depreciation.

When to buy?

This was the easiest question and my answer was: right now!

My opinion has always been that property should be held for the long term, for me that is over ten years.

I remember in the early 2000s when the market was moving up and friends said to me, “I’ll think I’ll wait for the market to come back before buying”.

Of course, they kicked themselves years down the track when the market was still high.

In the Hunter region of NSW, we did not see any correction after the rapid growth of 2000-2004, and since the market has enjoyed controlled incremental growth.

I think it’s best to get into the market as soon as you can but do your research and look for areas of good value. If you are clever and choose a flow-on suburb rather than a suburb that has already experienced strong growth, you can buy well and watch as the suburb eventually goes up in value.

I also believe the conditions right now are perfect: low interest rates, high rental returns and a good selection of property to buy. Soon, we may see an undersupply of investment stock and that can push prices higher. For me, this is an awesome time to be buying property (and developing it), our clients seem to agree.

There are many questions to answer on property investment; starting with these three may help you get into the market sooner than later.

Jo Chivers is director of Property Bloom, which manages property development.