Do I buy or build an investment property?

One of the biggest questions investors try to tackle on their own is whether to buy or build an investment property.

Buying an established home is definitely quicker, however, building a brand new investment property has many advantages. Here are six reasons why building an investment property might be the best option for you! 

Customizable and Modern

There is a great opportunity for customization when it comes to an investment property. You can build exactly for what the market wants, and what the market is willing to pay a premium for. 

With modern plumbing, appliances, heating, and air, a new construction home will definitely be attractive to prospective renters. 

Can be more affordable 

If you are looking to get into the property market sooner, building a new property can be the more affordable option. depending of course on what you build and where.

In Port Macquarie for example, the median house price for an established four-bedroom home is $780,000, and building your home is estimated to cost $700,000.

Pay less stamp duty 

When purchasing a house and land package, stamp duty is minimised as stamp duty is only payable on the land component of the package. 

Many investors employ this strategy to reduce costs. For example, on a $600,000 property in NSW, you will pay $22,500 in stamp duty.  However, if you were to purchase land for say $240,000 you are only liable for stamp duty of $7,100

Low maintenance 

Low maintenance is often a top property for many investors and building a new investment property eliminates the hassle of repairs and renovations. 

Every lighting fixture, floorboard, and bathroom tile is purchased brand new, and homeowners can rest assured that their investment property will withstand years of renter use. 

You can set and set and forget, and build equity in your sleep. 

Build equity instantly 

Once you have completed your build, you can get your lender to re-evaluate its value. 

If the home is re-valued to a price that’s higher than the initial value during your application, you have instantly added some equity to the property! 

A client of ours recently completed their investment build in Medowie. They started with a house and land package at $588,800 and after 12 months their property was revalued at $800,000. That is $220,000 in instant equity! 

Tax benefits through depreciation

Depreciation is the natural wear and tear of a building and its assets over time. As an investor, you can claim depreciation on capital works (structural component) and plant and equipment assets (easily removable fixtures and fittings) of an investment property.

Here are some examples of assets that deductions for decline in value can be applied to:

  • timber flooring
  • carpets
  • curtains
  • appliances like a washing machine or fridge
  • furniture

If you want to know more about building an investment property, reach out to

Joshua Boctorani & Nathan Lewes

Joshua Boctorani & Nathan Lewes

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