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Why invest in new builds and why I like Dual Occupancy

I have been in property in many shapes and forms since my early 20’s. My first property purchase was a run down old fibro home in South Penrith NSW, which I still own. About 5 years ago we added a granny flat and it happily sits positively geared. Would I have bought this property if I had known what I know now? The answer is no. This being said the fact we added a brand new granny flat has helped our investment along the way and with the cost of a sale and purchase of another property would not be wise to sell. You would have legal fees, stamp duty, agent fees, and capital gains tax to pay. The plan for my next purchase is to acquire a dual occupancy new build. Why? Because in simple terms the figures add up. See below.

FACTS

WHAT IS THE DIFFERENCE BETWEEN DEPRECIATION SCHEDULES ON NEW VS. OLD HOMES?

  • If you’re buying a new home, you get to depreciate your house and the assets in it. If you purchase a used property, you can depreciate the building, but only assets that you install new yourself. Based on an average $250,000 home, you can claim around an extra $35,000 in deductions over 5 years on a home you purchased new, compared with a 1 Year old home.
  • Buildings built after September 1987 depreciate at 2.5% per year, however, the assets within a home depreciate in value much more quickly. Anything built before 1987 cannot be depreciated so stay away from them as a long term investment.

Jim's Building InspectionsThis info was taken from Jims Building inspection. Click here for the link.

RULES OF DEPRECIATION

  • You can generally claim 10-20% of new property construction cost under division 40. For instance, a new property costing $400,000 to construct could generate $40k-$80k in capital allowance deductions over 10years.
  • High-rise new apartments may attract more Division 40 deductions due to more communal amenities (eg lifts, pools)
  • Land appreciates buildings depreciate. Stay away from apartments. Land on average shows capital growth of 15-20%pa, where buildings depreciate and are simply the vehicle for cash flow, which is why I like dual occupancy this means more cash flow and more fixtures to claim depreciation yielding a better annual return on investment.

your investment propertyThis info was taken from Your Investment Property Magazine. Click here for the link.

AREA DEMOGRAPHICS

  • Estimated population growth
  • Employment opportunities – Education and health care (Health care will employ 18.8% of all Australians in the next 10-15 years and education is one of our fastest growing industries and our 3rd largest export today which coincides well with the need for immigration.
  • Lifestyle opportunities, the urban land institute identifies 6 main reasons why families with children live where they do and this is a good criteria for your investment location.

7 Steps to Wealth : The Vital Difference Between Property and Real Estate - John L. FitzgeraldThis info was taken from John Fitzgerald’s book 7 steps to wealth. Click here for the link

 

Business owner, designer, stylist and mum.

kassandra@tweaq.com.au

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