First Investment – Old or New?

A few other issues with renting by the room are things like this:

Someone damages the kitchen or bathroom (the expensive rooms).  You cannot prove who it was, so you cannot really deduct it from anyone's bond.  It will come out of insurance or your pocket.

Someone leaves large items of junk in the backyard, and a big piles of old care tyres too.  You are, after all, running a free garbage collection service, are you not?  Once again, you cannot prove who left it there so you are stuck with the removal and disposal fees (entry to the tip is not cheap these days).

Someone damages the fence.  Again, can't prove who it was.  The same problem will apply to any shared area inside or outside the dwelling.

It is surprising how quickly a high gross yield will get eroded with things like this (and some of the things already highlighted in the post above by god_of_money).

Hi Sampson,

  Typically, buildings devalue while land appreciates – at some point, both houses will be knocked over and replaced (could be MANY years away however….)   

    A lot depends on the area and the Council.  e.g. if the older house is in an area with many other old homes, a Council "might" want to keep the heritage look of the area, and will be less keen to have anyone knock it down.  In Brisbane, this is called a Demolition Control Precinct, and it leads to much difficulty with getting approval to demolish if the area is of heritage significance.  We own one in East Brisbane that is under this Control.  

   Depending on the area you are in, there could be several possibilities :-

1.  The older house (if part of such a precinct) could even grow faster in value if neighbouring homes are having $$ spent to "gentrify" the area.  Of course, the 20yr old house could also be in a nice area where similar pride is displayed and the 90 yr old might be in a street where "nobody cares"…..   In that latter case, Mum may well be right. 

In short, in BOTH cases, are the houses you are looking at "the worst house in the street, the best, or somewhere in the middle?"

2.  Older homes tend to have larger bedrooms and smaller living areas – the larger bedrooms might suit the student market where they can spend time in the peace and quiet of their own room without going stir-crazy.  

3.  When reselling later, many buyers might "think like your Mum" – like, "Oh, we wouldn't want to buy that old place – it will cost too much to maintain!"  That could be why the current price is lower than the 20 year old…..   Can you get it for an even lower price perhaps?

4.  Re location, is the newer house perhaps closer to – shops, transport, schools,etc.   If so, this could also make the 20 yr old home more desirable, even to students.  They won't want to carry their groceries too far…..  

5.  Developers (including you, a few years on?) would want to get demolition approval as easily as possible.  What are each of the surrounding areas doing in that way?  Maybe they are not yet knocking down 20 yr old buildings, but does its location lend itself to more apartments (shops, transport, schools, etc) meaning that development into the future may well be easier.   Not too many Councils are concerned about "20 year old" districts (little heritage value) – but then, the 20 year old "might" be in an area with other 90 year old homes….    (gasp!!)   Is it?

  Sorry Sampson, no quick answers – just more food for thought, things to check, research to be done…..  

  Keep it up though – this is called due diligence (finding answers to questions that you may not have otherwise considered).   Go for it,

Benny