There are many benefits of buying new investment property as opposed to existing dwellings. Many of these advantages are not so obvious to newer investors, and can explain why the more experienced often seem to make it look so easy and effortless to build larger portfolios of positive cash flow property and enjoy larger net returns.
Firstly, tenants clearly prefer the new home feel and are often willing to pay more rent for a brand new home to live in, complete with the latest materials and design elements. This means being able to attract better quality tenants, enjoy maximum occupancy and lower turnover rates, while also receiving the maximum possible rent.
Well-appointed new homes also provide you with the confidence that you aren’t going to run into massive unforeseen repair bills or replacement costs for major appliances. Those are items that those buying existing investment properties can frequently discover catch them by surprise and turn a positive cash flow property into one with negative cash flow. Obviously most newly built properties and those reserved off the plan carry several years’ Builders Warranty Insurance against major issues as well as providing an enormous amount of peace of mind, something that an existing property does not provide.
This all equates to lower maintenance expenses and simplified management which can increase profit margins further and eliminates all the stress of constant repairs and maintenance calls from tenants.
Some State governments (NSW) are also currently offering cash incentives ($5000) to purchase new properties, even for investors, which currently makes buying new properties an even more attractive option.
However, perhaps the most overlooked advantage of buying a newly built investment property is being able to maximize depreciation and enjoy the most tax benefits which can make all the difference in the true returns while the property is held.
To get an estimate on just how much of a tax benefit a new property can potentially provide, click here for a depreciation calculator
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Investing in property via house and land packages has many advantages.
At Search Find Invest, we have made the process of searching for opportunities, screening builders, and financing the transaction,a streamlined process for investors choosing this path.
Benefits of choosing house and land packages include:
House and land packages incorporate two contracts; one for the initial acquisition of the land and the second for the actual construction of the home.
The most common format for financing house and land packages is to get pre-approved for financing which allows for an initial draw down to fund the land acquisition and installment payments released to the builder as they complete various milestones in the construction process.
A typical project involves between 3 to 6 stages or draws to fund construction. The benefit here is building equity on the entire purchase while only paying interest on the portion of any funds currently being used. There are additional loan options providing increased flexibility including interest only construction loans.
The actual build of the new house generally takes around 140 – 180 days from initial site works. This can take approximately 3 weeks after the land is settled. All tolled the entire process from contract to completion runs about 6 to 9 months.
‘Turnkey’ investment properties literally mean that once complete all the tenant needs to do is turn the key and start paying rent. Turnkey rental properties come completely finished with landscaping, driveways, window coverings, carpet, fixtures and letter boxes. All Search Find Invest’s house and land packages are offered completely turnkey.
Both off plan and house and land packages offer the advantage of increasing equity from the time of contract to completion. However, with house and land packages buyers have a little more control (and involvement) during the process. With off plan properties no construction loan is needed; buyers put up the deposit and settle the balance upon completion.
One of the best benefits of house and land packages is that stamp duty taxes are only levied on the land portion of the transaction. For example; instead of paying stamp duty based on the value and purchase price of an established home worth $500,000, if the land separately is only worth $150,000 that is what the stamp duty will be based upon.
This is a huge advantage and savings for investors and can be used to offset any interest expense from utilizing a construction loan. Of course this can vary by state and local government so be sure to verify all figures in advance.
New South Wales currently has a $5000 grant for all newly built properties.
Search Find Invest conducts rigorous research and background checks on all builders and developers whose house and land packages we recommend.
In the extreme rare case a builder would ever go bankrupt; a liquidator would step in to complete the building. Also remember that loan proceeds are only disbursed to builders in stages as work is completed.
Contact us today to get answers to any further questions you have about house and land packages and whether they would suit your situation…