Buying a house and land package can be – and usually is – seen as an accomplished dream for many Australians. However, it can also be seen as an investment and that specific perspective is what we’re going to address.
When considering any real estate investment you must look at the location, surrounding infrastructure, employment and the growth of the region to ensure that it will make a good long term investment. The house and land package niche market is no exception.
It all starts with its financing. In fact, it can be the single most important factor, as financing for a house and land package usually consists of two steps: buying the land and building the house. Buying the land is a standard real estate transaction with a regular mortgage. The second step requires a construction loan where you ‘draw down’ an agreed amount to pay for each stage as your home is being built. When buying a package, these two loans are usually bundled together – if not, you will be spending more than you should in interests, thus affecting your investment. Moreover, having everything on one contract makes it easier to make payments and work through the logistics of the purchase.
Arguably one of the biggest – or even the biggest – advantage of buying a house and land package as an investment in real estate is the depreciation and tax benefits.
As you know, the benefits of depreciation can be significant when buying a new home and should not be overlooked. In a new home, tax deductions can be claimed for depreciable assets such as the construction cost of the building itself, fittings and fixtures. A new real estate investment costing, say, a quarter of a million Australian dollars with extra fixtures and fittings can create approximate deductions up to sixteen thousand per year together with benefits received from claiming for the payment of rates, interest and rental management.
Moreover, when considering the tax benefits, you must know that many states offer grants for building a new home. The biggest saving for house and land packages is purchase stamp duty. On a typical house and land package of around half of a million Australian dollars, you can get savings around eight thousand dollars in stamp duty. There’s a good reason for this: in fact, when you are building a new house you are only paying stamp duty on the value of the land component itself (not the house and land components combined), as the house hasn’t been built yet.
Finally, if you are thinking about buying a house and land package for an investment purpose, there’s a real possibility of attracting better tenants. New homes with low maintenance costs and more efficient materials have a great economic advantage. In fact, not only you can charge a premium rent, but your tenants will tend to stay in for a longer period of time as well, which can mean higher returns for your investment.
If you’re thinking about buying a house and land package for investment purpose, contact us at Indigo Homes and one of our staff will be more than happy to assist you.