There has been a lot of discussion in the news in regards to either purchasing off the plan or an established property. Both present numerous pros and cons however the motivation to purchase is really where the key lies. The motivation to purchase is the hidden reason in determining which choice to make. Both have benefits, it depends on one’s situation.
First thing that needs to be confirmed, is if the purchase is going to be one to live in or for investment? Once this decision has been established, you will have a clearer picture of the next step. Off the plan properties once completed will generally always give a better rental return than an already established property. The catch to this is, generally the capital growth in these off the plan apartments are minimal. Alternatively the opposite happens with established homes. Rental return is low, but capital growth is high.
Purchase an off the plan apartment = $440,000
Rented for $400 per week (for 9 years after it took 1 year to build the complex) = $187,714 total rent
Purchase an established home = $440,000
Rented for $340 per week (rented immediately) = $177,285 total rent
FAST FORWARD 10 YEARS:
The value of the off the plan apartment is now approx. worth $600,000
The established home is now worth $850,000
The $10,000 less rent over the 10-year period might seem a lot, however in this example there is a huge difference in capital growth. $250,000 to be exact. Now this example does NOT mean you should always purchase established homes. It just gives an example. A lot can change in 10 years and should circumstances arise a simple rental return for security may be required and necessary compared to capital growth. Not forgetting the tax implications on either should it be purchased as an investment. That topic is for another blog!
Personally, I am a fan of established homes. Not only for the capital growth but for the land! Not forgetting that sometimes property should be treated like the share market. It’s more of a marathon – not a sprint!!!