If you are interested in purchasing a House & Land Package to invest in, then understanding how they work is vital. House & Land Packages work slightly different to purchasing an existing home, an apartment or even building a new home on land you already own. However, with a number of recent changes to depreciation regulations and stamp duty, House and Land package investments should quickly become the jewel in the crown of all property investors portfolios. We will help you understand why that is the case below.
Understanding the structure of a House & Land Package
When you are searching for the perfect House & Land Package typically a single price will be advertised which includes the price of the land as well as the cost of construction. However, when you are actually signing the contract and paying progress payments, the package is two separate contracts. There is the land unit, which you typically need a 10% deposit on and the building contract which you need 5% deposit on. While some may see two part contracts as additional admin, you are actually around 20-30% better off on the initial capital outlay with a House and Land package versus an apartment or established property due to only paying 5% on the construction value.
Usually when you are purchasing a House & Land Package the land it is not yet ready to build on. Like all other land estates and builders, you will have to wait for the land to title before construction can start. The wait until your land is titled will depend on whether the land has been prepared by the developer and registered by the council. Once the land is ready to be titled you are then ready to transfer the title of the land. For more information on that process check out this article.
If you are prepared to wait for your land to be ready to title there are a lot of benefits, including extra time for you to save money before you have to start paying progress payments, and making pre-ownership equity gains on the land value. When construction has begun on your House and Land package the builder will require payments at certain intervals (typically slab pour, frame, lock up, fixtures and final hand over), however typically with construction loans only once the final payment has been made will you need to start repaying the loan, which for some investors may be interest only.
Getting a loan for a House & Land Package
There are both similarities and differences between a House & Land Package and purchasing land separately and then finding a builder. One of the main differences is being approved for a loan. Typically getting pre-approval for a House and Land Package is more straight forward than for a standalone build. This is because most packages are at a fixed price (something you should always ask about upfront with the builder or agent), which means that the banks won’t expect you to come back to them asking for a bigger loan during the building process, something that can sometimes happen with a standalone build if the buyer hasn’t budgeted correctly for some of the additional costs such as driveways, landscaping, fencing, etc.
Why House & Land Packages are now a great investment decision
As touched on above, one of the big changes in recent months making new build House and Land packages a great investment decision is the new depreciation rules associated with investment properties. The changes have meant that deductions can only be made on Plant & Equipment (P&E, or otherwise know as fixtures and fittings) that you are the original purchaser of, meaning those purchasing existing homes will not be able to reap the benefits of depreciation on the P&E. For more information check out this article.
While this is a major benefit and in many cases offers an additional $20,000 pa in depreciation claims over an equivalent established home investment, there are also many other factors now making new build House and Land packages the best investment decision of all. These include:
- Only pay stamp duty on the land component, unlike apartments and established homes where you are paying stamp duty on the entire purchase price
- Outstanding rental yields of 4-5%, which as a general rule are more than double the rates you can achieve with apartments or established property investments, and the only property investment type that is truly cash flow positive
- Strong capital growth consistently between 5-10% but often higher in some areas over recent years, also with a very positive outlook given population growth and demand for new housing
- Lower capital outlays, this depends on location but rather than paying $600-800K for an apartment or $800K-$1.2M for an established property your investment can be limited to $400-500K making it more accessible to investors
- No hidden costs as the packages are fixed price and full turnkey, and because they are brand new and under 6-7 year warranties there are no nasty surprises that often appear with established property investments after your first tenant moves in
- Finally, as a brand new home that is also suitable to families (unlike apartments), house and land packages are highly rentable and also have minimal outlays in terms of ongoing maintenance or body corporate fees associated with established properties and apartments respectively
You can own your own home for under 400k, find out how.
Purchasing a House & Land Package through iBuildNew
Investment properties through iBuildNew
Typically building a new home is a long and extensive process, with lots of meetings and decisions to be made. With a builder, you have to choose colours, flooring, the façade and then spend time finishing the house with lights, curtains, landscaping and fencing. If you are an investor looking for a straightforward process and high quality returns, the team of property experts at iBuildNew are here to assist.
With a range of exclusive full turnkey House and Land packages available from a large panel of qualified builders, we will help you find the ideal investment for you. Give us a call on 1800 184 284 or book a call online to discuss investment opportunities with great returns and all the other benefits mentioned above.
Let us do the legwork for you.
- We’ll ask the right questions to better understand your needs
- We’ll create a recommended shortlist ideally matched to you
- We’ll answer specific questions or concerns related to home building, land purchasing or financing
Zoe Langenberg
Zoe is passionate about coffee and interior design. You can find her most weekends exploring an art gallery or devouring a good book.
1800 184 284
