If you’re thinking about investing in a house and land package for the first time, you are probably trying to weigh up the pros and cons. It’s a huge financial decision to make and what if it doesn’t pay off?
Before you take the plunge and invest, you need to fully understand what factors can affect the profitability of your selected house and land package.
Here are five key areas of the investment you need to understand.
1. Tenant Appeal
It’s easy to understand the appeal of a new home. The finished product is neat, attractive and holds plenty of kerb appeal for potential tenants. Since it’s a new build, the house looks modern and is designed to suit today’s market, unlike older houses that may need renovating to suit the current property demands.
You’ll also be able to claim plenty of depreciation from the tax man since it’s a new build. The value of a house actual depreciates over time while the land should appreciate (if you select the right location).
2. Location, Location, Location
While the new house will likely hold plenty of appeal, potentially the location may be a turn-off. If the house and land package is built in a new, developing estate there will likely be other homes being built in the area that can be inconvenient and noisy for tenants.
If you can find land in an already established location, you’ll likely find it easier to find tenants. You should also look further afield than your home city or state.
While Brisbane looks attractive at the moment, maybe Sydney or Melbourne may be a wise choice in future. It’s also good to spread your asset base into different states for land tax reasons.
When building interstate, it could be extremely beneficial to hire a local property inspection company like SPI in Melbourne so that you don’t have to travel just to inspect the property.
3. Reduced Costs
Another great benefit of buying a new house and land package is the reduced stamp duty since you’ll only be paying stamp duty on the land value. If you were to buy an established home you would pay stamp duty for the total value of the property, house included.
This can save you thousands of dollars. Another expense you won’t need to worry about is renovating and repairs; you’ll buy your property in perfect condition!
The downside is you’ll be paying a mortgage on the property while the house is still to be complete. If you purchased an established home that was ready to live in, there should be less downtime in placing a tenant.
4. Lifestyle Factors
When tenants look to find homes, lifestyle factors are a big consideration.
- How close is your property to public transport or other amenities such as schools and supermarkets?
- Does the property allow for a convenient lifestyle? Are there other lifestyle considerations for the area, for example, parks or the beach?
- Tenants tend to focus on the short-term benefits of a property so what does the location offer them right now?
The construction of a new estate can take time to blossom as infrastructure and the area, in general, is established. That can be great for the long-term growth in value of the property but short term can provide challenges in finding tenants.
5. Suburb Vacancy Rates
Check the vacancy rate in the area of your house and land package to get a sense of how easy it will be to place a tenant. Also, consider the size of the property and how well it will meet local demands.
Local real estate agents will have their finger on the pulse so it’s worth sounding them out to see what type of property is in demand.
*Bonus* Seek Advice
Like any large financial decision you should seek investment advice so you can fully understand the likely outcomes for your unique set of circumstances. For example, investing in property will have vastly different tax implications depending on your individual circumstances.
Book your free consultation to find out how we can help!