Buying Old or New property?

[23994]

Hi,

Want to draw some discussion around the New ~ old property Cons and Pros. What is your prefer and why?

In my view, the old house may have less purchasing price, but may also require more maintenance works than new ones and also the appreciation may be less than the New ones in the future...for example, +100 years old SFH or duplex etc

Also, if we want to buy close down town, CBD, even subway, LRT, that means houses around them are pretty old unless you have to pay a lot premium for the New buildings...

So almost new houses are not good cash flow unless you pay much more down payment.

Please share your thoughts here!

Thanks,

Sue

 

[Ahilan Thurairajah]

The purchase price of an old building depends on how well it has been maintained.

For a property to be easily rent-able, I prefer it to be in well-established communities with good walk-score.

There could be new buildings in well-established neighbourhood too. What is more important for me is if it can produce cash-flow to sustain itself. If I could find that in a newer land-oriented building, sure I would prefer that. So far all my properties are over 10 years old when I purchased it. One of them is over 100 years old.

 

[Antoine Palmer]

It really comes down to the property. You can find a 80 year old house that was built to last and may be worth upgrading to modern specs. You can buy a 20 year old house that was very poorly built and will give you maintenance headaches and unhappy tenants.

Best approach is to conduct a building condition assessment and model out your maintenance schedule over the period you intend to hold the property. If you do this comparatively between properties you'll get an idea as to which assets will perform best, assuming all other factors being equal.

 

[Thomas Beyer]

Both make sense. It depends on your goals.

Almost always a new home is in a suburb, or it is very expensive if in an established neighborhood. If the goal is to rent and do a medium to long term hold (5-10+ years) then almost always OLD is better.

But not always.

That is why both get bought and sold, as with cars. What is better: a brand new Hyundai for $25,000 or a 45 year old Mercedes for $25,000 ?

Generally speaking, you make the most money in the ugliest assets as the opportunity to add value is the greatest !

 

[23994]

Thanks all for your sharing and I agree with all, especially Thomas comment! it really depends on the actual condition of the building and the cash flow it can generated, so both can work if they fit...but maybe 8 out of 10 will be OLD house with well maintained or you can fix it by yourself

 

[Thomas Beyer]

Thanks all for your sharing and I agree with all, especially Thomas comment! it really depends on the actual condition of the building and the cash flow it can generated, so both can work if they fit...but maybe 8 out of 10 will be OLD house with well maintained or you can fix it by yourself

More like 9.5 out of 10

 

[xu8650]

what are your experiences with +100 years old house? I am looking to buy one recently, but bit nervous with the Older house down the road the maintenance and repair expenses, also appreciation and easy to sell or not for future(5~10 years)...our strategy is to buy and hold/rent out and for 5~10 years term

 

[Thomas Beyer]

Any property acquisition needs DD (due diligence). The older the house the more DD is usually required and the higher the potential repair bill for old plumbing, rotted basement foundation or old wiring.

Some houses are worth nothing, in fact cost money to tear down. Land is where the value lies in most instances. What is the lot worth ?

 

[xu8650]

I don't know the lot worth, how could I find out? it is detached house, 40X70 size, close to CBD, D-5 zoing

 

[Thomas Beyer]

If you do not know the lot value then you haven't done enough DD. Talk to an appraiser. Talk to other property owners. Get the tax assessment which often breaks out land and house value. Check other nearby sales.

 

[xu8650]

You are right, Thomas, I am kind of new to investment and do not have a lot of experience here...when I do the tax assessment, we use 75%~25% for building and land, but in this case of +100 years old, I am not sure about it... I will try to look at the tax assessment if the seller is willing to provide it...

Thomas, as your experience, +100 years old SFH, what is the roughly split between the building and land? do you suggest to buy this type of property?

 

[Thomas Beyer]

Thomas, as your experience, +100 years old SFH, what is the roughly split between the building and land? do you suggest to buy this type of property?

Roughly 0-max 10% for house, 90%+ for land, unless the house is substantially renovated already i.e. not really 100 years old !

I trademarked this: People have drowned in rivers one foot deep on average.

You cannot get SPECIFIC insight on a SPECIFIC property here unless you give very SPECIFIC information.

 

[RE123RE]

People have drowned in rivers one foot deep on average.

Hi,
Semantically. You know there aren't really rivers one foot deep on average
Thanks

 

[RE123RE]

Generally speaking, you make the most money in the ugliest assets as the opportunity to add value is the greatest !

Hi,
A powerful statement for investors to understand and remember.
Thanks

 

[Thomas Beyer]

Hi,
Semantically. You know there aren't really rivers one foot deep on average
Thanks

I think there are quite a few

 

[RE123RE]

I think there are quite a few

Hi,
Name one
Thanks

 

[Thomas Beyer]

Bow or Elbow

For example

Very wide and shallow at the outer edges, deep and fast and cold only in the middle 20%

 

[23994]

I checked my own tax assessment and there is No split between the building and land values there, I am at Ontario...

 

[RE123RE]

Bow or Elbow

For example

Hi,
They are not exactly 1 feet on average.
If you want the sentence to be correct/more precise, maybe change the word 'one' to 'less than one meter':
People have drowned in rivers less than one meter deep on average.
PS. I think it is a pretty knows joke though.. in case it is important for you to be original.
Thanks

 

[Thomas Beyer]

Noted.

My trademark uses a foot. You get the point. Details matter. Averages are somewhat meaningless.