Another question people often ask is: Should I buy new developments or existing property. Once again, there is not a single right answer – the best answer is: “it depends”. So let me state benefits and risks of new developments and 2nd hand property.
Today I focus on 2nd hand property.
The biggest drawback of 2nd hand property is the purchasing costs, especially if you buy in a trust. In fact, the cost of buying in a trust is so high that I would normally not recommend it. So 2nd hand property we buy in personal capacity.
But the benfits are enormous. Mostly when you buy an existing property, you know what you get. It is established. There might be a tenant in the property already. So you have a very good idea of actual rent. There is a history of costs, so you know what it is going to cost you.
What does that mean?
It means that I will probably have a paying tenant when the property is registered in my name and I know exactly what the rent is. Since there is a history, I can plan much better. I am fairly sure of my income and I am fairly sure of my expenses. Therefore I can plan my cashflow very carefully and accurately.
I normally answer the question like this: if your cashflow is under pressure, rather buy an existing property, because you can plan better. The chances of nasty cashflow surprises are less.
Tomorrow we look at the risks involved with new developments, then this will make more sense.