At Prospa Property Advisory we regularly speak with investors about the benefits of building a brand new investment property, rather than buying an established property.
I know what you’re thinking: it sounds like a headache, particularly if you’ve never built a home before. Or, if you’ve had a negative experience with a builder before this may seem like a daunting prospect. Let us assure you that the end result is well worth it, particularly with Prospa Property Advisory on your side because we take the headache out of building!
Here’s some reasons why you should consider building an investment property.
- Most people think that they are losing money while the property is being built because the rent is not being received during the construction, this is actually a slight misconception. Although you are not receiving rent you’ve actually benefited from some significant stamp duty savings because you only pay stamp duty on the land component – and not the total land and construction amount. This means you have actually saved thousands of dollars on upfront cost such as stamp duty & transfer taxes, this savings can then be used to fund the progress payments on your construction loan. In most cases this becomes a cost neutral exercise, and in some cases you will actually save money through this process.
- You get a property that is designed and built purely with your desired tenant type in mind. You can choose the layout, number of bedrooms & bathrooms, level of specification and additional inclusions that may be essential to attracting the target tenant – something the Prospa Property Advisory have already addressed in our property acquisition process. An established property may lack certain features that are considered desirable for tenants such as garaging, a bath (if they have young children), an ensuite or separate toilets so you are instantly excluding particular segments of the rental market.
- Tenants generally prefer properties where everything is new, shiny and more importantly in good working order. A lot of renters have lived in sub-standard properties where the landlord does very little in the way of maintenance which can cause frustration and an unhappy tenant. This can lead to a high turnover of tenants, extended vacancies and ultimately reduce your financial return.
- Everything inside your newly built investment property is brand new and covered by a warranty. This means from day one you have the peace of mind knowing nothing needs to be done and if any issues do arise, you are covered by warranties and guarantees. And even if after a few years you are let down by something like an appliance (e.g. an air conditioner or oven) it is highly likely there are suitable replacements parts available which makes repairs convenient and less costly.
- Following from the previous point, because tenants prefer a newer property you can often charge a premium for brand new properties, which can mean securing a better quality tenant. This is not meant to be elitist, it is more about protecting your investment with the best possible tenant who will look after the property.
- A brand new investment property carries some significant taxation benefits that could save you thousands of dollars each year through depreciation. A taxation ruling from May 2017 stipulates that depreciation benefits can only apply to brand new plant and equipment (i.e. fixtures and fittings in the property) in an investment property. Depending on the property you could be missing out on claiming over $15,000 in tax credits in the first 5 years, this can make a significant difference to your financial return.
- You have the backing of our network. If you’ve had a bad experience with a builder and are worried about it happening again or have never built and think it will be a difficult (and time consuming) process, remember you have the backing of Prospa Property Advisory and the Aspire Advisor Network rather than dealing with the builder alone. We only partner with trusted builders who can demonstrate a proven track record of building quality homes and to gain accreditation with us they must pass an extensive due diligence process. This means we also have a lot of “clout’ should something go wrong, which is not the case when you as an individual arguing with a large building company.
- Our property advisors do all of the heavy lifting and take care of the entire process which means you enjoy a smooth process from start to finish. Plus all our of packages are 100% fixed price so there are no hidden extras, you know all of the relevant costs upfront.
So, if you’re thinking that building an investment property sounds all too hard, think again. A bit of short term gain could result in some serious benefits over the long term – and successful investors play the long game.