When investing in property, it can often be way too difficult to know which kind of property suits you, your strategy and buying rules. The decision between buying a brand new house and land package or existing property can be a confusing decision.
Both of these options have their own pros and cons, and at the end of the day, your decision matters solely on which option will best suit your investment goals. To make this process a bit less stressful, we have gathered pros and cons for both property investment types to help you make an informed decision about your next property purchase.
House and Land Packages
– House and land packages are a great option for first-time investors who are looking to get their foot in the property market and they tend to have multiple options available for financing.
– It’s a clean slate! This is a big advantage because you can build the ideal property for your own purpose or goal: whether that be to rent it out or live in it yourself.
– Shiny, new and modern fixtures, fittings and features mean that they will be more favourable for potential tenants as they will most likely prefer a modern property. New features and fittings also mean that you won’t need to worry about having them replaced or updated. This can save you so much in maintenance costs and lower your expenses.
– A significant benefit that house and land packages are able to bring to the table when investing in property include being able to claim new home tax deductions. These claims involve depreciable assets such as the construction cost as well as the fixtures and fittings. This would mean a new investment home worth about $250,000 with $30,000 worth of fixtures will create deductions reaching $16,000 per year. There are also additional claims that can be made for payment rates, interest and rental management.
– You are able to collect a big saving from stamp duty. This is because you would be required to only pay for stamp duty on the value of the land component as the new home is yet to be constructed. As a result, the typical house and land package amounting to around $450,000 can allow you to save about $8,000 in stamp duty.
– There may be an uncertainty of how the completed project will turn out to look like. You won’t know whether the quality of the fittings and finishes will meet your expectations and the different kinds of properties that will go in surrounding the block.
– Construction delays are also a fairly common occurrence. Bad weather (something that no one can control) can cause unforeseen delays.
– When investing in property, there are many choices when it comes to location and the neighbourhood you would like to invest in.
– A pre-existing property will also already have driveways, landscaping and fencing which won’t be added at a later expense.
– An established property is generally more affordable than a newer property.
– There is historical data about the property that will give you an idea of how its value has changed over time, helping you make an informed decision.
– Some might think of this as an advantage, and some won’t. But with an established property, you can renovate and add more value to it, which can boost your equity.
– Depending on the age and condition of the property, you may have limited options for redesigning. If you are unhappy with the current design, layout, features and fittings, then you need to be prepared to cover the costs for an upgrade and renovation.
– Also depending on the condition, it might be hard to get financing from major lenders. They might hesitate to give you a loan because they know you will need to take out additional loans for upgrading the property.
– When investing in property, pre-existing properties have less appeal than newer ones because they may have an outdated design. If a tenant has a choice between a new property and an older one, that both have similar rent costs, it is likely that they will choose the newer option.
How Do I Decide?
When it’s time to decide what type of property you want to invest in, it’s important to choose an option that caters to your future investment plans. Weigh up your options carefully and pick a house that suits your design and financial requirements. It all comes down to this question: “What is your goal?”
How Can iBuildNew Help?
If this is your first time investing in property, working closely with an expert will simplify your experience. Speak with our phone consultants and you’ll get advice and help in working out the rest of this list. Contact us on 1800 184 284 today or book a call.