When I invest, I want a market-beating return without sacrificing safety and security. For that reason when I invest in residential property, I’ll only buy new builds – not existing homes. 

I understand I might be biased on this point. I am after all a director at Williams Corp, a company that sells more new builds in Christchurch than any other. But with that aside, I’ve been investing in new property (including several of my own builds) and it’s been a hugely successful strategy.

Here’s why.

New builds last

There comes a point in a building’s life when the cost of maintaining it increases exponentially. Foundations may rot, crack or subside. Roofs might sag or rust and need replacing. Wooden window frames swell and warp and moisture starts building throughout. 

If you do your sums, you’ll quickly realise that any gains you’re making are being eroded by maintenance and repair costs. Especially considering that replacing a roof or window frames can cost $20,000 or more depending on the size of your home. 

When you buy a new build, you buy something that’s up to current building code, with more modern materials. If you buy a high quality build, it could be several decades before costly problems start to crop up – meaning more money in your pocket, for longer.

Tenants love new builds

One of the most common problems new landlords have is dealing with vacancies. There are countless ways to minimise vacancies from screening tenants well, to managing the property effectively.

But the best way to keep your tenants is simple – just provide a warm, dry, attractive home that’s a pleasure to live in. Older homes often fall short but high quality new builds usually tick all the boxes and will make it easier to retain your tenants.

LVR rules do not apply

One of the biggest barriers to entry for most property investors is New Zealand’s strict LVR rules, which require that you have 30% equity in investment properties*. That means you’ll need a 30% deposit to buy, which is a whopping $180,000 on a $600,000 property.

If you buy a new build, you’ll be exempt from those LVR rules and you’ll be able to buy with just a 20% deposit. This makes it much easier to get started and to expand your portfolio.

Better tax benefits

When you purchase a new build, you’ll be able to claim depreciation on chattels, fixtures and fittings. With existing homes, most of these items are already depreciated, meaning you don’t get most of these tax benefits. 

That means if you purchase a new build, you could reduce your tax bill by several thousand dollars over the first few years. This extra money can be used to pay down your mortgage quickly or to cover your rental’s costs. 

Solid capital gains

A high quality, new build has huge potential for capital gains. Buy in a thriving area near the city with great amenities and you could see your property appreciate in value just as much as any existing build – if not more.

*LVR rules have been temporarily relaxed and you may be able to purchase an existing investment property with less than 30% equity. Experts say these LVR rules will be back in place in 2021.