Back to our analogy. New build - 0 time/effort choosing bathrooms and kitchens, it’s already A* quality. Older style property doer-upper - considerable hours pouring over bathroom designs and the like. The temptation is also rather high to overspend with this sort of thing because you want to make it “just right.” So how much do you value your time? To see the real trade-off between the two you can’t just compare purchase price against what it would be worth in 5/10/25 years, but how much time and effort you spend updating/refurbishing/maintaining it. Same goes for the exterior. Although by and large a new build developer will appoint some kind of managing agent this is of course an expense that you, as the leaseholder, will need to bear. The time spent maintaining the outside is outsourced, so you are paying for someone else’s time. I would argue that if you are going to buy a property and hold it you are planning to hold for the longer term, 15-25 years. in that space of time you would expect to have to carry out some form of work, be it bathroom/kitchen or maybe even a roof repair. I would therefore wager that less time is spent upgrading and repairing a new builds style property; this is however reflected in the returns over time (see graph).
So which is the “best?” Well that still very much depends on how hands-on you want to be. New build is certainly less involved from a repair and upgrading perspective, but if youdon’t mind the odd repair or upgrade then you can’t beat an older style property, they have always done better over time in terms of saleability (less identical supply on the market at any given time) and have lower fixed outgoings on the whole in the form of service charges, ground rents and the like. So from a purely investment point of view I would have to lean towards an older style property from an appreciation point of view. Is an older style property suitable for everyone? No, one size doesn’t fit all - which is right for you? Bear in mind however that there are better vehicles out there than new build properties - the yield is likely to be in the region of 3-4%; better returns can be made by working together with a property investor to leverage their skill and expertise and employ the money into a bigger, more profitable scheme rather than become a landlord yourself. I for one am working with a few bigger developers in order to accelerate my returns. If you’d like to hear more then by all means drop me a line and start the conversation.