The trend of “buying off the plan” has witnessed a lot of progress in the last decade with many investors queuing into the idea. The associated perks are tempting and the promise of a huge return on investments has never been this enticing. However, this viral trend in the property industry isn’t void of risks and cons. Matter of fact, it packs a huge share of cons than pros.

The associated pitfalls have been surprisingly unsuccessful in deterring investors. When you flip through the pages of the national dailies, you still find uncompleted apartments and housing projects being sold off in their numbers.

In this posts, “buying off the plan” will be stripped bare while weighing in on the pros and cons. If you’re new to the property industry and would like to invest, then this is for you.

Buying Off the Plan – What You Need To Know

The catchphrase “buying off the plan” in the property market simply denotes the purchasing of an uncompleted property. The property could be nearing completion or just rearing up above the ground, so long as it is not fully completed to taste and it is being sold off then it can be termed as buying off the plan.

The Pros

Stamp Duty Savings

One of the most flaunted perks of buying off the plan is the potential savings on stamp duty. Naturally, a stamp duty is placed on every property in the market according to its market value. Since you are buying off the plan, the value of the building is lesser relative to a finished one and so does the stamp duty. So you get a chance to save more on stamp duty.

Rise in Equity

Although this is laden with uncertainty, the value of a property is likely to sky-rocket on completion giving you a decent return on investment. According to a property stats conducted in 2017, the value of properties in Melbourne Australia rose by 8.9% in one year. Imagine how many investors would have gotten a day filled with smiles having invested 12 months prior. Suffice to add that this investment is void of loan interest and holding costs.

You Can Start With Little

Perhaps you are on a tight budget but still itchy to invest, buying off the plan affords you the opportunity to start with the little you have. This little here can range from as low as 5-10% deposit of the agreed price. Most deals come with a flexible payment plan and you can spread it over the agreed period while anticipating the completion of the project.

The Cons

The Equity Might Drop

The instability of the property market can take a huge toll on your property. A whole lot could change in just a month, if you aren’t so lucky and the tides doesn’t tilt in your favor, you might end up with an undervalued property after having spent so much investing on it. It’s a game of chances and uncertainties so if you want to cast your earnings on these investments be prepared for outcomes – positive and negative.

Low Land to Asset Value Ratio

Lands have always had an upper edge over assets and whatever physical entities they are holding in terms of value. While land appreciates in value, the reverse is the case for properties. These days developers in the bid to rake in business fortunes, often congest lands with multiple apartments which result in a ridiculously low land to asset value ratio. Always aim for the highest land to asset value ratio.

Investor Imbalance

Investors are like the unofficial target market for most off the plan business deals. So you are likely going have more tenants than actual home owners in your off the plan investment. Investors won’t pay keen attention to maintenance as much as home owners would do and this can affect the capital value of the building in the long run.

How to Be On the Safe Side

To be on the safe side, you need to have a good counsel. Before involving in any off the plan investment, ensure you have a veteran legal counsel by your side. The complex nature of these off the plan investments can end you up in more financial woes than you can ever imagine if you go unguided. You also need to investigate the background of the developer and know if you are dealing with a transparent and genuine one or not.

Real-estate in Australia is growing high day by day. But only those people are successful in this business who possess some mind-blowing qualities to run this business. Not anyone can raise the value of their property just by investing money, because money isn’t everything.

A person must have a good mindset to lead in this work. Let’s talk about 7 traits of Australia’s property investing elite.

1. Aim and Goal

A successful property investor has long-term planning. He sets his goals and makes his decisions according to a perfect strategy. Investing in a property does not mean to spend money without having any vision about it. An investor takes every step into this world by seeing his aims and goals about that property.

2. Wisdom

An investor never invests his money into the property business with thorough research. He takes full advantage of the resources around him. He searches through the newspaper, internet, read blogs and articles about new trends in the market. He discusses his plans with other property dealers and experts who have been in this business for so long. He learns every new concept about the business and gets success through his wisdom.

3. They have Patience

Australian property investors work patiently. They are calm about the business, they do not freak out if the property values fall down. They know that every business has ups and downs. So instead of losing their temper, they try to make a better decision with patience. They wait for the right time to take the right step in the right place.

4. Money Can’t Buy Everything

For a successful investor, money isn’t everything. No doubt it has great importance in running a business, but it cannot buy everything. It can’t buy knowledge, wisdom, ability to make decisions, experience and much more. Property investors don’t run after money, but if they do work wisely, money runs after them.

5. Connections with People

You cannot be a good property investor if you are restricted just to your home. You need to step out to see the real bigger world. Rich property investors have not become rich just searching through their homes, but they have strong relationships with a number of people. The powerful bonding with the dealers lets you know about all the major and minor details which you can never think of.

6. Ability to Negotiate

They negotiate with the dealers intelligently. It does not mean that they go for bargaining when they want to buy a property. They know how to get the right property with a suitable amount of money. They understand how to negotiate and how to influence the dealer. They think wisely, they choose wisely!

7. They Know the Numbers

A property investor is confident about its financial status. He knows about each and every detail about the numbers. Whether the accounts are clear or not. Is with the profit being in progress? Is this good debt or bad debt? He possesses a good sense about calculating the numbers.

Summary

It is not difficult to be a good Australian property investor. You just need to focus on what you are doing. You can never be a successful property investor in one day, you need to start your business from scratch. A high jump might take you to fall down. Gain experience from the mentors and professionals that how do they deal with the business. And then put your skills and experience together to be one of the successful property investors. But first, try to find skills in yourself and adapt these traits of Australia’s property investing elite.

Investing in a property does not mean to just spend a huge amount of money, it also means that you are going to earn a lot from it. It is an amazing idea to invest in a property to secure your and your family’s future.

If you are a first-timer to invest in a property, then you need to know every single detail of it. What are the pros and cons of investing in the property? Why you should invest in it? Which type of property should you choose to invest your savings? And the list is too long. But you need to know these things if you are a first-timer and you don’t want your money to get stuck in some kind of fraud.

Here we are discussing 7 tips for first-time property investors, and they are so useful to be implied.

Get Information About the Market

Do thorough research about the market in which you want to invest. Either it should be a commercial property or a residential property? Is it good for business or better to live with family? You need to know about the trends which the new markets are following. Investigate the demands of property values. You must be sure about the property, that you are buying the correct one, on correct time and at a correct place.

Contact with Professionals

Before you spend your savings into just any property, you must seek help. Contact with the professionals that are in the real-estate business for years. Discuss your plans with expert property dealers & brokers and also share it with your family and friends, they will never give you a wrong suggestion. They will guide you about the property trends and advice you to invest in a good place. Search through newspapers and the internet to get the updated news about properties.

Renovate Your Property

Always renovate and rebuild your property every few years. It will make your property look new, stylish and will make your business grow faster. If it is a commercial property you need to renovate it more from the outside than its interior. Because from inside the business owner will design it according to his business. And if it is a residential property focus on its interior rather than the exterior. Make its bedrooms, bathrooms, and kitchen new and according to the current trends.

Look Out for the Area

If you want a residential property, always look that it is a safe and crime-free place. See if the markets are nearby, so people have to travel less for shopping. If you want to invest in the commercial property, watch for an area where the business market is rising high.

Manufacture Equity

If you want to increase the equity in your property, you need to pay a huge amount of money as a downpayment. And try to pay your remaining loan regularly and within a short period of time. It will increase equity faster.

Find a Partner

If you cannot afford a property singly, you must find a co-investor. As the prices of the properties are rising day by day, it is a good decision to co-invest in your property. Find a trustworthy partner, it would be great if the partner is your friend or a family member. So, there would be fewer chances to break up the partnership.

Loan for Property

If you are applying for a loan, always make sure to get one that suits you best. You have to show your gross income and financial status that whether you qualify to get a loan or not. So, keep in mind you need to calculate all the numbers in advance when you ask for a loan. Always try to get a shorter period of time to repay your loan, in this way your interest will be less, and equity will grow quicker.

These are some of the useful tips you need to consider if you are investing in a property for the first time. Always think wisely and don’t make these important decisions alone. Get advice from your friends and family and contact the professionals and mentors that are in this business for a long time.

Whenever you think to start a new business, everyone suggests you invest your money in the property. But is it true that property business is the best among all businesses? Or is it the faster-growing business? You can never be 100% sure about what is right and what’s not.

Some of those ideas are usually myths in which people believe by heart and mind.  You have to be sure whether it is actually a good business to invest money or not? So, if you want to take a step towards real-estate business, you need to ignore these 8 property investment myths.

1. Earning is Easy and Quick

People believe in this myth so much that it has gained huge popularity among property investors. But it is always not right. Making money in property business has never been so unchallenging and fast. It takes a lot of time to take the right decision in this business. You have to be calm and patient about it. Quick decisions always bring a loss in real-estate.

2. Prices Always Increase

It is not true! Every business has ups and downs. There is not a single business in the world which always rises. People think that the prices of the properties are never getting low, it will always increase. It is a popular myth believed by the oldies. Nowadays, the market has become so changed, always the value of the best property increases quickly.

3. You are too Young for this Business

People in this business are usually oldies because they have great experience in this field. Whenever a young person talks about entering into this work, everyone says that you are too young and doesn’t have any knowledge about it. But in fact, there is no age to involve in any business, but it is good to start from a young age. Because it’s never too late!

4. You Need Money to Produce Money

Well, it is only a misconception that you need a huge amount of money to make a lot of money. You can even start your business from a low budget. The only thing that grows your business is to take every step wisely. Your patience and correct decisions make you able to produce more money from less investment.

5. It is Difficult to Invest

No matter it was difficult to invest in the past. But in this modern era, nothing is complicated. You can gain the whole information about the real-estate business just by staying at home. You can search through today’s high-tech modern devices to get into the property world. You don’t have to go person to person to talk about it.

6. Best Time to Invest

There is not a perfect timing to invest in this business. Sometimes the market is low and sometimes high. Only a successful investor knows about the accurate timing to invest money in the property and he knows how to earn from it. While the unsuccessful investor fails in this business whether it is good timing or not. A good mindset can always gain profit from any timing.

7. Buy a Property Close to Your Home

Buying a property that is actually near to your home in which you live might be a good decision. But it is not always right. It has some pros and cons. Pros include, you already know about the area and local market values; it saves traveling money; you can have an eye on the property. But it has some disadvantages too. You should explore the city to know about other properties; other areas might be good in gaining profit; the actual business market has more chances to rise than a local market. You must seek other opportunities too!

8. High Rents will make Tenants Leave

If you think that by raising the rent of the property tenants will switch the place. It is wrong! If you will provide all the facilities a landlord should provide, they will not think to leave the place. Just increase some amount of rent yearly, don’t try to jump directly on the higher amount.

There are numerous myths about the real-estate business. It can affect you badly if you trust them. Always do research before investing in the property and take a wise step in this business.

The equity in your property increases if you pay the remaining loan regularly and if the value of your property also increases.

For example, if you buy a property of worth $300,000 and pay 20% deposit ($60,000), you’ll borrow a loan to pay for the remaining ($240,000) balance. Your equity in the property is $60,000 ($300,000 loan less $240,000).

In this scenario, you effectively “own” 20% of the property and your ownership stake in the property increases as the different between the property price and the loan balance increases.

Now if the value of your property is increased and reached to its double i.e. $600,000. You still have to pay the remaining balance that was left at the time when your property was half of its price. In this way, you possess an equity stake of 60%. The balance of your loan hasn’t changed but the value of property equity has increased.

How can you manufacture equity in your investment property?

There are numerous ways to increase equity in your property. Let’s have a look at some of them.

Higher initial deposit – Try to pay a larger deposit at the time of purchasing the property. The remaining balance will be less, and you will likely pay less interest over the long term also. Where possible, aim high with the deposit.

Renovating of the property – Renovating your property strategically can be a way to boost your equity. Ideas such as adding an extra bedroom, adding an outdoor area or a garage or carport can be done at a relatively low cost, but boost the equity beyond your outlay to renovate. Lesser ideas like new flooring, a kitchen upgrade, or even considering a bathroom renovation can also pay dividends.

Shorter loan period – Usually banks give an option to pay your loan in a period of 30 years. But you can make this period shorter if you are able to pay more every month, like 15, 20 or 25 years. In this way, you ultimately end up paying your loan down sooner.

Extra repayments – Consider making lump sum payments from work bonuses or cash gifts. Even if it’s only a few hundred dollars here and there. It does add up over time.

Refinance – Provided that you’re not on a fixed rate, refinancing every 2-3 years to a lower interest rate is a very simple, yet often overlooked way to pay down your loan quicker. The trick when refinancing is to keep paying the same amount you were before the refinance was done. This way, more of your regular payment will be principal than before and you will find that it quickly ads up over time.

Pay weekly or fortnightly – There’s an old trick to pay your loan of quicker, which is to take your monthly repayment, divide that amount by 2 and make that as a fortnightly repayment.

Paying fortnightly allows you to squeeze in the equivalent of one extra monthly repayment per year. The following example gives you an idea of how it works:

Assuming your monthly repayments were $2,000, after a year you would have paid $24,000 (12 x $2,000). To pay fortnightly, you split your monthly payment in half, making a fortnightly payment of $1,000 ($2,000 divided by 2).

As there are 26 fortnights in a year, you will pay $26,000 (26 x $1,000). This is $2,000 (equivalent to one monthly payment) more than if you were making repayments on a monthly basis. extra amount comes directly off your loan principal, and reduces the amount on which future interest will be calculated.

As the interest is less, more of your repayment will be going towards paying the principal off your loan, which means that your mortgage gets paid off sooner. (Source https://www.yourmortgage.com.au/home-loan-guide/fortnightly-vs-monthly-repayments/78306/)

Do you’ve a desire to renovate your property for the profit purpose but feel like your limited capital is restricting you from doing this?

Do not despair. The great Napoleon Hill said, “There’s nothing which belief and a burning wish can’t make real.” Whatever the price bracket of a property market you’re in, there would always be a lot of opportunities – only you have to have some plan & just stick to this.

Hence what are the main keys to renovate your property in order to make some profit in a lower end of that market?

1. Show Restraint

A most important key to make it sure that you make some profit in the cheap suburbs is to actually make the minimal alterations wherever it is possible. In case, this is not broken then you need not to fix this! Buyers will not be actually looking for the high-end finishes as they only want functional, clean, and uncluttered spaces which look modern & make them feel like at home.

In case, you’re sticking to the formula of consuming 10 percent of your purchase price on the renovation, for example. Then, on a 230,000 dollars house, the renovation budget requires to be actually kept to only 23,000 dollars. You have to become quite creative for keeping the costs down & make some profit out of it.

In the renovation of the asbestos cottage in the cheaper suburb, the old owners actually polished its floorboards before they rented the home out. Its floorboards were actually in good condition hence we did not spend much money unnecessarily on the repolishing.

When this home was decluttered & basic furniture brought in, this was not a problem for the buyers that its floorboards had not been currently polished.

2. Lighten Your Mood

Keeping the things bright as well as light is the perfect way to persuade buyers, especially when they’re planning to reside in that property. In the small houses, it’s even more crucial. People may love the feel and look of the real wood just like jarrah, however, they do not need to view this everywhere!

In the cottage renovation, jarrah cupboard doors in your Master Bedroom had dominated the room. When they’re painted with the white gloss, a feel of that room altered dramatically & this became inviting and soft.

3. Follow Recent Color Trends

In the cosmetic renovation, you’ll be painting so much. The painting cost might be similar whether you select a current color or a dated one. Hence, it is the no-brainer – just go current!

When you do not know regarding what colors to select, take some piece of advice. And, you might check paint companies out online just like Dulux Inspirations or check websites such as Instagram and Pinterest where you’ll find a lot of inspirational images. In case you still could not decide about the colors (or are not quite confident that you will get this right). Then, you might hire the Dulux Colour Consultant via Bunnings for 99 dollars.

In the cottage renovation, we’ve chosen the Linseed Half Strength for our internal walls because the color was contrasted nicely with the white trims as well as the wooden floors. It gave the home an inviting and warm feel.

Plus, externally, cream colors went very well. As the dark Ironstone frames of the windows were painted in white color to make their façade look more inviting. The Ironstone color on the base slats and gutters was actually retained in order to save money and time. We selected Shale Grey for our wall colors for complementing the Ironstone & to contrast warmly along with the white windows.

This could be quite rewarding in order to renovate the less expensive property, especially when there’s some wonderful stuff to be renewed. Do not be just put off through making a comparison of yourself to Television designers or renovators on social media. Just show restraint. You need to remember that keep the things light, simple, uncluttered, and clean. Combine all these tips together with modern styling and smart color choices. In case, you’ve finished your homework & selected a suburb which has great demand from the buyers then you must celebrate.

Before You Turn the Home Property into the Income Property

There’re 2 important things to remember. The very first point is the insurance risk. In case, you’re using your property in such ways that are not mentioned on the insurance policy, Then in this situation, your insurance might (& likely would) get invalidated in case of a flood, fire or some catastrophe. But, you need to decide how to use the property so you should acquire the insurance coverage.

Second, make sure you will not take more than you could handle as the renovations could be expensive and physically trying.

Investing money in a property is a risky game. The risk is not about just investing the money, it’s all about ‘how’ and ‘where’ should the money be invested? And what will be the pros and cons of it? You want to purchase a property? You must need to know the major pros and cons of the property you are interested to buy.

The two major types of property include residential and commercial property. Commercial properties have further categories, like, buildings for offices, apartments, retail, industries, and warehouses. Each kind of property has its own direction, dominance, and risks. You need to reckon all the economic factors prior to investing in the property.

Add the following things into your list in advance when you are ready to put a step in this venture:

• The demand of the business and services you provide
• The requirements of the consumers
• The variation between the residential and commercial market
• The effect of the population in that area and bringing innovation into the market.

Let’s discuss some of the fundamental pros and cons of investing money in commercial property.

Pros of Commercial Property Investing

Financial Profit

The more wisely you invest, the more you will gain the profit. The financial gain from a residential investment is 3-5%. Whereas commercial properties let you gain a double profit of about 6-12%. And it is a really good figure.

Long-term Leases

In commercial properties leases are long-term and flexible. The tenants don’t leave the property frequently; the stay lasts for about five to ten years or longer.

Professional and Public Association 

In the commercial market, the owners of huge businesses deal with the public and customers. It makes their association more professional than a small growing business owner. Small businessmen deal with the small market area.

Social Attention

The owners of residential markets have to maintain their property or stores to attract the customers. It helps to run their business well. But commercial business owners maintain the quality of the business and property to gain popularity in the commercial market.

No Furnishing Price

If you buy a residential property like a house, you need to get it furnished before handing it over to the tenant. You must add the basic home needs into the property. But, for commercial property, there is no need to spend money on its furnishing. You can give it to the tenant just as it is. The tenant will furnish the property by himself according to the type of business he owns.

Cons of Investing Money in Commercial Property

Finding a New Tenant

The leases are long-term in commercial properties rather than residential. So, if the property is vacant, it needs more time to find out a new tenant. Meanwhile, the landlord has to pay to cover the cost of the property.

Affected by the economy

Commercial properties are more sensitive to the economy than residential properties. When the economy goes down, the businesses are affected by major losses. And the tenants stop paying the rent.

High-Cost Property

Commercial properties are always costly than residential ones. Due to the biggest markets of businesses in commercial areas, the property costs a huge amount of money. It is not possible for every investor to invest in such big stuff.

Difficulties Buying and Selling

Buying as well as selling a commercial property requires time, money and thorough research about the details. There should be no misjudgment by the property holder.

Think wisely before investment

If you want to make money and earn faster, you should invest in commercial property. But always keep in mind these pros and cons before investing in your future.

There are some common myths which kill the potential for wealth of an average property investor. How despite is that you live in the plenty of land, but a sad truth is that most of people never achieve this financial freedom.

Still, there is a small number of property investors that are getting wealthier as they ignore these old myths.

So, for becoming like one of those, ignore these common myths as they can hold you back from achieving your financial goals.

1. If you are rich, you are lucky.

The fact is that the wealth creation isn’t related with the luck. For becoming richer, you need to have a good control over the finances instead of counting on a good fortune. If you have a good investment strategy, luck seems unnecessary. A good player knows the right spots for getting the best results. They know the ways of acquiring and controlling the amazing “monopolies” for collecting the highest results.

2. Paying off the house grants security

It is one of the oldest myth which many people learn from their parents. However, it really doesn’t make any sense in this new era of investment and finances. A main problem is that as you do pay off the house, you are left with an idle equity and sitting under a roof not doing anything; the equity which you could have use as the deposit for buying the investment property for growing your wealth.

3. If you have a rent money, you have a dead money

Yes, this old chestnut. You need to buy where you reside, get a big mortgage, and spend your whole life paying that off, right? NO.

Did you hear of rent vesting? It allows you to reside where you wish and inesvt in where you are able to afford. Following are some reasons to consider rent vesting.

● You can choose the area which is in city or close to the work and live the way you want to.

● If you have a house in which you live and decide to move to the new city, you have to sell it. If you are renting, you only have to wait unless you run out of lease, instead of worrying about mortgage.

● If you own a house, you would try to pay it off as soon as possible. However, if you get an investment property, minimum payment can be paid on the loan and concentrate on rest of the things.

4. If you do it rightly, do it yourself

There exist nothing like a self-created millionaire. Every successful property investor owns a great team full of professional advisors as well as supportive mentors with him. but this doesn’t mean that you must hand over complete responsibility of the wealth creation to them. Rich identify that they are no experts in every aspect of the wealth creation, thus they need an expert team who can help them in achieving their goals

5. For becoming rich you have to diversify

Wrong!

Still this is what many financial planners recommend, isn’t?

An average outcome comes from diversification. A successful investor doesn’t diversify – he creates his skills that are required for making a better and smarter investment decisions and then specialize in only one niche at a time.

6. Done everything wrong? It’s never too late

It gets never late to learn the ways of investing or overcoming your mistakes. There are a lot of success stories that involve people who dominated all kinds of adversity. These people started investing later on and achieved the financial freedom.

7. Debt isn’t good

Many people think that debt isn’t a good thing, however not every debt is not bad. Some good property investors understand the uses of good debts for buying the useful assets.

8. Renovations add value into property always

It is suggested to renovate the houses and other properties once in a year. Renovation can increase the worth of a property and enhances the sales. Thus as the property owners spent more money on their property, their purchase price will increase. Even if they don’t add a same amount into the value of the property, they can have a more sales. 

Buying existing property, renovating or building afresh is quite a headache and tiresome, that is why we have this piece to offer you some tips to help make the whole process more comfortable for you.

To generate more returns, you have to consider whether you are going to purchase then sell it later or buy it then hold it.

Whatever the choice you pick between the two you have to keep in mind other factors such as renovating, building new or buying existing property.

As you go through your decision making process, consult experts to guide you through.

Purchasing Existing Property

Pros

• More space for less money – although all the area may not be habitable immediately, the cost for the physical building (as a percentage of the whole property value), purchasing existing property typically costs less than building a new house. Building a new house will take longer and so you have to factor in holding costs during construction also.
• Location – established property are at times situated in older neighborhoods or an established urban environment. Moreover, older houses may have some “old fashioned” charm on the interior, for example original tiling or crown moldings and other extras that are not typically standard in new dwellings.
• There is likely easy access to social amenities such as parks and recreation centres because you are in an established region. On occasion, building new will draw you to outer fringe areas which may have a less established local neighborhood.
• Buying an established property means you can use it immediately to make a profit. If you rent it right away, you can start getting a return quicker than on a renovation or new build.

Cons

• Some established property may have outdated appliances and features. This will add cost since you will ultimately have to do repairs or replace some of them.
• Established homes could run you into unexpected challenges such as unscheduled maintenance and repairs.
• In general terms, the older the property, the lower your rental return, therefore rendering a less yield than many new builds will deliver.

Building New

Pros

• When you build a new property, you become part of a new community that has sound infrastructure and therefore attracts more rent.
• Another distinct advantage of building a new house is everything will be new. Forget about the hidden repairs or outdated appliances. This improved your cash flow.
• Building a new house comes with some incentives like the first home owner’s grant (this applies only to new constructions in a lot of Australian States), lowered stamp duty is another benefit.
• You will also be able to manage the cost of building and save more.

Cons

• It takes time to build. It could take you close to a year to build a new house.
• There could be hidden risks and other issues which could pose challenges as you build.
• There are other factors which could be a headache like choosing color, design or layout.

Renovation

Pros

• Just like the existing property you can make returns on your investment in a short time. This will depend on how long the renovations will last.
• You can also redesign the property with modern appliances and features to attract more rent. You are also able to control the costs.
• Location of the property may attract more rent as compared to building new.

Cons

• Unless you are an expert, sometimes it is difficult to renovate or own property that needs a lot of repairs.
• The time for renovation may blow out.
• Some houses may require significant renovations which were earlier hard to detect.

Conclusion

As an investor, you have to look out what suits your profit-making strategy. This is a business and not a get-rich-quick scheme, you will have to carefully examine the costs to reduce the your downside risk.

When deciding to invest in property, a brand new house and land package may sound appealing at first. However, it is necessary to weigh up the pros and cons to arm yourself with adequate information to make the right decision. There are many advantages to purchasing a new house and land package; however, do these advantages outweigh the disadvantages? Let’s outline the pros and cons to facilitate your decision-making process. 

The Pros

Tenants Are Attracted To New Properties

Tenants are generally attracted to shiny new homes. Properties that have never been lived in appeal to those who are looking for contemporary, fresh accommodation. Searching for a tenant should be straightforward and easy, and return on investment is often steady with new properties.

Maintaining The Property

There is usually less maintenance associated with a new property as opposed to an older property. Therefore, less money spent in the first few years.

Stamp Duty

When you purchase a house and land package, you will only pay stamp duty for the land, not the actual property.

Depreciation Advantages

Brand new properties typically get larger depreciation deductions; this is often due to the high value of a new home. This means that the cost of holding the property over time will be lower.

Fluidity

There is more fluidity and flexibility when you build your own home; you can customize it to your exact specifications.

Cons

Consider the overall cost, when you buy a new property, the developer’s profit is often included in the total price of the property. The costs associated with marketing and promotion of the property can often be passed down to the buyer. These obscure costs could be comparable to several years of capital growth. Therefore it is essential that you think carefully about what you are willing to compromise to purchase a house and land package.

Location

Most house and land packages are situated further away from the city. On the plus side, The land is plentiful, on the downside, the economy is often weaker in these locations, and they are often underdeveloped in comparison to inner city locations.

Uncertainty

The uncertain nature of purchasing property off plan is something to consider. Will the end result meet your needs? You have no control over the outcome of the property. Therefore, this could cause issues with the final bank valuation. It is also difficult to compare rental prices for similar properties in the area.

Land Value

Logically speaking, when purchasing a property for investment purposes, it is wise to search for a property with a significant proportion of land value for capital growth purposes. However, when you purchase a new property, the majority of the value is in the building itself, not the actual land. This will have a negative impact on capital growth when the building depreciates.

Old properties in the suburbs will certainly not be as attractive as a brand new property; however, the investment potential is far higher in the long run.

Paying and Not Earning

When you opt for a house and land package, you will not earn anything while the property is being built. However, if you borrow money for the purchase, you will be paying interest during the planning and building phase of the project.

Building Problems

Building a house is not predictable, you cannot predict construction problems and timelines, unfortunate incidents often occur causing construction delays and other issues. In addition to this, be prepared to spend more money than you initially expected to pay as unexpected expenses emerge.

Adding Value

Savvy investors are aware that adding value to an investment property through refurbishment is a crucial part of building wealth with property investment. There is often less flexibility for renovations with new build properties.

In conclusion, at first, glance, investing in a house and land package might seem like the most attractive option. However, if you are looking for long term investment benefits, a new build is not the most viable choice. Weaker capital growth, inability to add value and the high costs associated with building a new property should be taken into consideration when opting for a house and land package as opposed to an older property.