New or existing stock?

Had an interesting conversation about someone who’s portfolio included 7 or 8 houses that he’d built up over a number of years.

He’d been a buy to hold investor, had a solid job and used his money wisely to transfer it into physical tangible assets like real estate.

He’s looked at the massive change in the market from non deductibility, interest rates, LVR requirements for new builds vs older homes and realised it is obvious where this is going.

For his retirement, he’s choosing to progressively, individually sell down through every single one of his second hand properties and to replace them with new builds so that over a number of years, (it may take him 10 years) he won’t have anything second hand left, everything will be healthy homes compliant, tax deductible and at a high LVR for borrowing purposes.

At first it struck me as maybe a bit much but as I thought about it, if you’re going to retire and do maintenance on properties anyway, if you want to have gains over a long period of time, if you want to buy more properties for your portfolio in the future and for yield and return basis and if you’ve got gains and equity in your existing portfolio stock, it is definitely better to have new properties and makes a lot of sense to sell down through some of that old stock, get into brand new stock that has government lead initiatives and advantages to it.

It’s easy to think about your personal situation, for example with my own portfolio, I really like everything in there. All if it is second hand/old houses in great locations with some that would be incredibly hard to replicate but a handful of them are not hard to replicate as they are just simple and old. Some of these properties could be replaced with brand new, housing that would be tax deductible.

People are slowly coming to terms with the fact that everything has changed in the last 12 months, there are new rules in place and there are new ways of doing things and a new way of thinking.

Interested to hear about your next purchase! Comment below ‘existing’ or ‘new build’