As a property investor in the UK, one crucial decision you’ll face is whether to invest in new builds or old builds. Both options have their merits, and the best choice for you depends on your investment strategy and preferences. In this in-depth article, independent estate agent based in Bishops Cleeve explores the factors to consider when deciding between new and old properties, helping you make an informed choice based on your individual needs.
The Appeal of New Builds:
There are various reasons why buy-to-let investors often prefer new builds. Firstly, these types of properties typically require less maintenance and can be occupied by tenants immediately. In addition, new builds usually come with a 10-year warranty that covers structural defects, which can provide reassurance for investors who are less involved in the day-to-day management of their property. The inclusion of modern appliances and technologies is also a significant draw for potential tenants.
In the competitive UK housing market, developers tend to plan new projects with local amenities in mind. As a result, new builds are often located in areas with good transport links and easy access to shops, schools, and other essential facilities. However, it is worth noting that new builds can be more expensive per square foot compared to older properties.
In terms of rental income, new builds tend to attract tenants looking for a fresh, contemporary living environment. With everything brand new and up-to-date, landlords may find it easier to attract tenants and maintain higher occupancy rates.
The Charm of Old Properties:
In contrast to old builds, many individuals, including investors and tenants, hold the belief that new properties lack the same level of character. Older homes typically boast features like sash windows, wooden beams, high ceilings, and open fires that contribute to their unique charm. One key benefit of investing in an old property is the potential to add value through renovation, and examining historical data can offer insight into the property’s potential for future value appreciation.
Despite their appeal, older properties come with a set of challenges. Issues like wiring, pointing, brickwork, and roofing problems are all common concerns that can arise in older homes. Fixtures and fittings, such as boilers, may also require replacement or upgrading, which can be a costly undertaking. Older properties may also need more general maintenance due to the wear and tear that naturally occurs over time. In the worst-case scenario, a major issue may arise while tenants occupy the property, resulting in lost rental income and potential rehousing costs.
Moreover, older properties tend to be less energy-efficient than new builds, which can deter tenants due to higher heating and power costs. Upgrading an old property to meet current energy efficiency standards can be expensive.
On the other hand, old properties can offer more flexibility for investors. For example, you might be able to negotiate a better purchase price or find a property in a prime location that new builds can’t match. Additionally, the renovation process can allow you to tailor the property to meet specific market demands or add unique features that increase its appeal to prospective tenants.
Comparing Old and New Properties:
Modern houses are designed with function, practicality, and energy efficiency in mind. Although floor plans may be smaller than those in older properties, clever design and space-saving measures can still make new builds feel spacious. Older properties often focus on symmetry and tradition, appealing to tenants who value character.
Despite the potential cost of renovating an old property, there is still an opportunity for profit. Old homes typically cost less than new builds, which can be around 20% more expensive in desirable areas.
Weighing the Pros and Cons:
There is no one-size-fits-all answer when choosing between old and new build investment properties. If you’re willing to take on a fixer-upper and be hands-on with renovations, an old property can provide a better return on investment than a new build. On the other hand, if you prefer a low-maintenance option that generates rental income without renovation hassles, a new build may be a more suitable choice, especially for first-time buy-to-let investors.
In terms of profitability, factors such as location, rental demand, and purchase price will significantly impact your returns. While new builds may command a premium price, they often come with lower maintenance costs and a more predictable rental income. On the other hand, old properties may require a larger initial investment in renovation and upkeep but can offer potential for significant capital appreciation and a unique charm that attracts tenants.
Ultimately, you can diversify your property portfolio with a mix of old and new investment properties. Whichever type you opt for, it’s essential to ensure a good rental yield to maximize your returns. Make informed decisions on when and where to expand your buy-to-let portfolio by conducting thorough research and staying up-to-date with market trends and local property values.