Brand New Property
Investing in a brand-new property offers numerous advantages that can contribute to your success as a real estate investor
Rental returns
Firstly, brand-new properties are ready to be advertised to potential tenants immediately, attracting high tenant interest and ensuring strong rental returns. With modern features and fixtures, these properties often experience low vacancy rates and require minimal maintenance and repairs. Investing in a brand-new property can provide tenants with a contemporary living space that meets their needs, enhancing tenant satisfaction and reducing turnover.
Increasing property value
Brand-new properties typically hold higher values than similar second-hand properties in the same area. While market performance may vary, trends indicate property values increase over time.
By investing in a brand-new property, you position yourself for potential capital growth, allowing you to build equity and increase your long-term wealth.
More benefits
Investing in a brand-new property gives higher depreciation benefits. As the owner of a brand-new investment property, you are eligible to claim all deductions available on the structure and any fixed or mechanical assets.
Unlike second-hand properties, which are subject to legislation changes restricting depreciation claims on previously used assets, brand-new properties allow you to maximise your deductions and enhance your overall tax benefits.
To illustrate the advantages of investing in a brand-new property, let's consider a case study
Imagine an investor who owns a new three-bedroom home purchased for $600,000, generating a rental income of $545 per week or a total income of $28,340 annually. The property’s expenses, including interest, rates, and management fees, amount to $39,067. In this scenario, the investor’s cash flow is significantly impacted by depreciation benefits.
In this case study, we’ve maintained a consistent rental amount for comparison purposes. However, it’s noteworthy that statistical data indicates that brand-new properties typically command rental rates up to 20% higher than their older counterparts. In practical terms, this could potentially translate to an added weekly rental income of over $100. Additionally, older properties tend to incur significantly higher expenses, potentially ranging from $1,000 to $2,000 more annually, due to increased maintenance and repair requirements.
| Without depreciation claim | |
| Annual income ($545 x 52 weeks) | $28,340 |
| Annual expenses | $39,067 |
| Pre-tax cash flow (income - expenses) | -$10,727 |
| Total taxation loss (pre-tax cash flow & depreciation) | -$10,727 |
| Tax refund (tax loss x tax rate of 37%) | $3,969 |
| Annual cash flow of the investment property (pre-tax cash flow + tax refund) | -$6,758 |
| Weekly cash flow of the investment property | -$130 |
Vs
| With depreciation claim $11,200 | |
| Annual income ($545 x 52 weeks) | $28,340 |
| Annual expenses | $39,067 |
| Pre-tax cash flow (income - expenses) | -$10,727 |
| Total taxation loss (pre-tax cash flow & depreciation) | -$21,927 |
| Tax refund (tax loss x tax rate of 37%) | $8,113 |
| Annual cash flow of the investment property (pre-tax cash flow + tax refund) | -$2,614 |
| Weekly cash flow of the investment property | -$50 |
Difference of $80 per week
The depreciation deductions in this example have been calculated using the diminishing value method. The example above accounts for income and expenses for the property only and does not consider other income or expenses they may be eligible to claim.
Investing in a brand-new property can provide numerous advantages, including attracting high tenant interest, potential capital growth, and higher depreciation benefits.
However, Lumo Property Investing emphasises the need for personalised discussions and strategic assessments to determine if a brand-new property aligns with your financial goals.
We are committed to working closely with you, evaluating various factors, and creating a tailored approach that sets you on a path to financial success.
01
Book a discovery session
Fill out the form to book a discovery session where you can share your goals and dream financial outcome.
02
Get a customised plan
We’ll map out a property investment plan with you so you don’t have to stress about doing it alone.
03
Financial freedom is within reach
Confidently build your wealth through smart, fact-based property investments and when your equity builds, go again. It’s as simple as that.
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Beyond the boom and bust: How to profit in real estate despite the market cycle!
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