BUYING NEW VS OLD
Welcome to John Fitzgerald and his answer about “Why are new properties always your best investment.
This concept is often mistaken for many investors as they look at a property at the day that they settle the property and look at its cash flow but don't know forward modeling. It's like a business that does not forward cash flow planning and the forward modeling and then when you do it on older property becomes a money pit and why that's a major concern is that you can't then use it to build more. Following the Murphy’s Law, if you’ve got three or four older properties then everything will go wrong at the same time, all the houses particularly those that up 10 15 even 20 years on can cost as much as five ten thousand dollars a year and sometimes if you let that go every few years you'll get a twenty thirty thousand dollar bill. So your properties are not only keep your cash stay, it is also cost you a bit number for maintenance.
John said he has never bought old house, and new house would be the good investment choice because it going to ensure that his cash flow is positive but going up and therefore he could forecast his cash flow get growth in the property.
Some people asked “If I'm buying on the property won't I get better growth?” The answer is YES. You might get better growth because in an older property you might have more land content however you're going to have much worse cash flow and the much less cash flow in habits or inhibits your ability to get compound growth and therefore mathematically. As his word “If we both start out I'm going to be way ahead of you in five six seven years and I'm going to be assured of my cash flow so it's pure mathematics and what I say about properties and the thing about building is that I often say to people don't take building risks really get your guarantees from your builder, and make sure you've got insurance from your builders all those sorts of things and make sure you depreciate one hundred percent of your building which you can't do on all the properties have your cash flow manage”.
Cash flow is the same cache is like oxygen if you run out of it it'll be over very quickly for you and yes you might think you're smart and getting that older property for the first one or two years until the problem happened. As the story from John, his toilet breaks tree out the front lawn underlined the roots under the ground. Thirty thousand dollars to pull the tree out replace the driveway the retaining wall and fix the toilet. Cash is like oxygen it'll be over very quickly for you if you're stuck in that predicament and it's certainly not a way to build a property portfolio just mathematics.