Do older properties appreciate faster or slower than newer ones?
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This is a bit of a noob question and I think I already know the answer, but I'm curious to see what others think.
With how fast properties around the U.S. have appreciated over the past few years, I'm wondering if there's a difference between the amount of appreciation that older properties have seen (by "old", I mean properties built anytime before the 1970s) as compared to newer properties (by "new", I mean properties build anytime after the 1970s).
I realize there are a lot of variables to this question, but still, I'm wondering what others have seen. Whether you invest in older properties, newer properties, or both, has there been any noticeable difference between the amount of appreciation you've seen among each?
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Matt Payne Great question, in my opinion I think it’s all relevant to the economy and the area the home is in. Two things we no one can control or predict.
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Matt Payne when I sold off a couple of my duplexes in 2019, they had more than tripled in value since I bought them a few years earlier. They were both very old. I think one of them was built in the late 1800s and the other one was built in the 1920s.
Granted, I didn't have any properties that were built after the 1970s, so I don't really have a good comparison from the same market, but just looking at these two by themselves, they didn't seem too hurt by the fact that they were old.
I think it's also a function of how cheap you bought them for in the first place. Regardless of where the market is at, you can always find motivated sellers who will sell for WAY cheaper than market value... and if that's what you're able to do, the things will technically "appreciate" a lot overnight, simply because you got a bunch of free equity at the closing table.
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Buying a new property v/s old one? Nice question. I think both things have their own pros and cons like:
Prons of buying a new property:
- There is minimal maintenance required on new properties.
- Government incentives for first home buyers can reduce the upfront funds that you need to come up with.
- Newer homes are built with better efficiency.
- You will get a builder’s warranty on new homes.
- You will get the emotional benefit of "newness".
Cons of buying a new property:
- You can’t add value through renovations/improvements as easily, so it may take longer to achieve capital growth.
- Historically, newer properties are the first to get hit when the market moves down. Established properties tend to maintain their value or adjust a few degrees over the long term.
Pros of buying an old property :
- You can add more value to an established property through renovations and improvements.
- Older tend to hold more value in the land than the building itself. In general, land tends to grow in value while building loses value over time.
- Older properties have a proven resale value since any exchange is between a willing buyer and a seller, and will likely meet the market.
- Older properties tend to be located in areas with more established infrastructure such as transportation, schools, hospitals, etc. These infrastructures are also drivers of property growth.
Cons of buying an old property:
- Old houses require more maintenance.
- Older properties have lower rental returns compared to newer units.
I think it totally depends upon your circumstances and needs.
