Investment: Is It Better to Build or Renovate?
Who invests in real estate always faces the same dilemma: buy an existing building and completely renovate or start with a white sheet and set up a new building? Both have advantages.
Behind the choice for a renovation project are often financial motives. For example, for renovation projects, a VAT rate of 6% applies in many cases, while that for new buildings is 21%. On a project of 200,000 euros, you pay 30,000 euros more VAT for new buildings. It takes a while before you have recouped the extra costs. At the same time, there are varying premiums for renovation. On the other hand, renovation costs are often much higher than originally budgeted. You can spread these costs over time, but that is not always an advantage for the real estate investor who wants to finish his property as quickly as possible in order to earn money with it.
Moreover, you better be a piggy bankConstructing structural maintenance works as soon as a building is older than ten years (especially for apartments this is recommended). As an investor, these are additional resources that freeze you.
A new building has the advantage that you can immediately realize a much lower energy level than what is usually possible with renovations. Of course, all those investments benefit the resident, who therefore has to pay a less energy bill. But energy consumption is a factor that is becoming increasingly important for many buyers and tenants. New homes are also often better in the market anyway because everything is still new. As a result, it is often easier to find buyers or tenants who are willing to pay that little bit extra (although the price must, of course, remain correct).
New construction has another advantage: because you start from scratch and because everything has yet to be filled in, you can also make optimum use of the available space. This is often more difficult for renovations, where the existing structures have limitations. In addition, the costs of new construction can often be better assessed in advance.
Are you avoiding renovations? Certainly not. There are even buildings where renovations are preferable to new buildings. Then it usually concerns properties that have a very special appearance and for which there is a (usually more limited) audience that wants to feel deeply in the pouch. Stately mansions are a good example of this. Just like old factory buildings that lend themselves perfectly to being converted into lofts. And that makes it clear that every real estate story is different.