Looking at the region that you invest in can make a big difference to your return on investment, but when you invest in property have you considered the newbuild vs old conundrum? There are pros and cons, either way, so we’re going to take a look at these in turn.
Provided by Hawkhurst Invest on behalf of Ancojada Property.
Questions to ask before you invest in property
Buying a new property or an older one for investment purposes is not dissimilar to buying a new home for you and your family so this might be a good starting point for your consideration.
1. What are the costs of newbuild vs old Among the highest costs for any property is its maintenance. There are numerous areas to consider. Things like decorating and general maintenance come at a cost but are often relatively low. There are, however, a number of big-ticket items to consider before you invest in property:
Roof maintenance, repair, and replacement
Central heating and boiler repair and replacement
Repair and maintenance of exterior walls
There could be other areas to consider, but these represent potentially significant costs. It is more likely that an older property will require more maintenance than a new build and the repair or replacement of a roof or boiler could run into many £thousands. These costs can be mitigated with the right maintenance contracts in place, but it stands to reason that the older a property, the more maintenance it is likely to need. New build properties are not, of course, without the need for regular maintenance, and they will need initial decorating, landscaping, and preparing for rental.
2. What’s the Build Quality like? Surveys will show up any weaknesses in build quality, structural issues, and problems like subsidence. It’s simply not the case that new builds are better than old ones thanks to improved building standards and better materials. Faults with new builds are well documented and reported in the media. However, a new property is protected by a 10 year National House Building Guarantee so if there are issues there is some protection.
Older properties have been around for longer, so any issues with build quality are likely to have been resolved. That said, older properties will be constructed using older materials like lathe and plaster. Less efficient boilers could also be installed.
So there’s a decision to be made between potentially early issues caused by poor construction and later problems caused by wear and tear and age, and the costs that will be incurred by a newbuild or older property.
3. What’s more desirable, newbuild or old? There’s no simple answer to this. It’s really down to your preference as a landlord, and the personal taste of your potential tenants. On the one hand, newbuild properties are modern, well laid out for the modern world, and are fitted with modern fixtures and fittings. They will also be good to go, so no renovation costs are required. So what makes a property more desirable will depend on a variety of factors like region, age of tenants, income, personal preference, and so on. So you, as the property investor, must consider your own preferences and business objectives.
4. What’s the Business Proposition? You should apply business thinking to any investment opportunity never mind before you invest in property. But in this context, the business proposition applies to your decision between newbuild and older properties, or a mix of both. Some of those considerations will be:
Rental yield What is your return after costs likely to be when you compare newbuild and old?
Estimated maintenance and renewal costs. Take advice on likely costs for both new and old. Calculate what your maintenance budget and available working capital need to be to replace things like boilers. What is your return likely to be and which type of property are you more comfortable with?
Estimated occupancy rate of newbuild vs old. Is there a difference between the two types of property in any of the regions that you’re looking into?
Localised property availability If your strategy is to purchase newbuilds and availability is poor in your preferred area, you will need to reconsider. Is your choice of property right, or the area you’ve chosen?
Before you invest in property there are many factors to consider We’ve taken a look here at just a few factors here comparing newbuild and old properties. It’s important to know what you’re getting into. If you’re unprepared, you could be caught by surprise with an unexpected cost, or a property sitting empty.
At Ancojada Property, our property sourcers put every single property, whether a newbuild or older through a rigorous due diligence process before they’re made available to our investors. So we’ll have the information that you need on rental yields, costs, and the local areas as well as a host of other important data to help you make your decisions and invest in property
If you’re at the beginning of your journey to invest in property get in touch with us and we will arrange for a member of our Ancojada Property team to make contact with you.
Ancojada Limited trading as Ancojada Group is not authorised or regulated to provide financial advice.
All financial advice is provided by other regulated businesses.