Could newly build property be the right investment for you?

Many investors wonder what types of property to buy as an investment. Not many consider building their dream investment property. Why would you go to the trouble if there are so many established houses for sale?

To help you decide, we want to explain the process of building your own brand-new investment property from scratch. It is a lot easier than you think and may give you many benefits along the way.

You become a mini developer working with your builder, however you can be “hands off” along the way.

Turnkey Package

Many investors shy away from building a brand-new house because they think the process will be too hard. Let me introduce you to the concept of “turnkey house & land packages” as part of a smart investment strategy.

Turnkey means that the house is finished ready for a tenant to just turn the key and move in at completion. The house build contract includes the carpets, tiles, window dressings, flyscreens, paths, driveway, fencing, lawn, landscaping and including the letterbox and TV aerial!

The house designs, colours, facades and finishes are all done by experienced design teams to suit the demographic and lifestyle demands of the area / location. So, for a busy investor wanting to grow their portfolio with a brand-new house it provides a perfect stress-free solution.

Building Process

You buy a package of land with a house already designed for that Lot, to be built by the builder for you at a fixed price contract over a period of 4 -6 months. This can be as painless and easy process.

It is not a home you are going to live in so you do not need to be emotionally involved. The builder looks after the construction process and the bank pays the builder at each stage.

Council approves the plans and building certifiers, building inspectors and bank valuers make sure the house is built to specifications. Builders normally send you progress photos at each stage which is very exciting.

This opens up being able to invest in markets interstate, away from where you reside, where there may be stronger drivers for growth and better rental yields than in your own backyard. Smart investors know that diversity in location is the key to a good investment portfolio.

Finding a Tenant

If you build it, they will come! Tenants can be very demanding and a brand-new home is very attractive to them.

They are willing to pay a premium rent to have all the modern features that come with a new house – stone benchtops, ensuites, alfresco outdoor areas, family rooms and media rooms, minimum gardens to maintain and all appliances new and shiny, no plastic gloves and cleaning needed before moving in!

A smart investor does their cash flow and with the higher rental yield, they realise they can be in positive cashflow territory without even trying.

Savings on Stamp Duty

One motivation for building your own investment house is the significant stamp duty savings. As the house is not yet built, stamp duty is only required on the land component of the purchase price.

For example, a 4 Bed House & Land package in Queensland has a purchase price of $570,000. The land component is $330,000 and the Build component is $240,000. The stamp duty and mortgage registration payable at settlement is approximately 10,924.

If an established property of same value had been purchased the stamp duty would have been closer to $20,512. So, a smart investor has already made savings of about $9,588.

Although there are interest payments to be made during construction, the interest paid is all tax deductible.

Check how your home loan compares

Maximising Tax Benefits & Minimising Maintenance

Building a new investment property can maximise the tax benefits giving peace of mind as you can anticipate your holding costs. No nasty surprises as there will be no maintenance costs as everything is under warranty.

As it is a new property, you can claim all expenses AND depreciation on the building and contents, giving you a cashflow positive outcome.

That’s right no money from your pocket.

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This article via Your Investment Property does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.