Rental Property: Renovate or Buy Brand New?

You have two potential investment properties you are looking at: 

Number 1: You have a brand spanking new, fresh from the box, 4 bed, 2 bath home in a new development.

Number 2: You have a tired and unloved but lower priced property that needs quite a bit of work. 

How do you choose which is the better bet?

This is where your property investing strategy would come into play. The 4 x 2 is pretty attractive as it's all fresh and sparkly, you can use depreciation to your advantage when it comes to tax time and looks great to potential tenants. But then again, since it's a brand new development, maybe the location is not as desirable. The Renovation Special needs a lot of work  and since you've been watching 'The Block' religiously, the idea of taking a tired property and making it fantastic seems like a great project, especially if it's in the right location.

So how do you decide?

The bottom line is the numbers!

This should be the critical consideration. 

How do the numbers stack up? Once you have bought it, paid out everything you need to, and have tenants in place how does it look? 

Buy Brand New?

Brand New House:

Keep in mind that when you buy a brand new out of the box house in a new development, the first tenants will pay premium rates. It's not until maybe the 3rd set of tenants come through, that you will get a true idea of what the rent will be over the long haul. This is due to seeing how the other properties in the development are doing, and what rent they are receiving. So keep this in mind when you are running the numbers.

Or tackle a reno?

Renovators Delight:

When it comes to your Renovation Special, keep in mind that you don't really know what you're going to find until you strip the house back.Yes, doing a house inspection is critical, but like all renovations, you need to factor in more of a cost for the unexpected. How will those unexpected costs impact your numbers?

Another thing to keep in mind is your ability to handle stress, especially if you plan on tackling the reno yourself. This stress and your other daily commitments may make buying a brand new property far more appealing.

In fact I would never recommend for a first time property investor, to undertake a major renovation project. This is because you do not have the experience (unless you're a builder who does this for a living). Having said that of course, if you employed someone to find the property, run the numbers, get quotes on the work, oversee the work, and rent it out, then maybe that would work for you.

There is no easy choice when deciding on what property to buy if you are looking at 2 completely different properties. That's why looking at your overall investing strategy will help you make the final call.

Have you had to choose between two different properties? How did you make the choice?