“The bottom line is that while investing in new property can seem appealing, it often proves unsatisfying over the long term due to weaker capital growth. If you are looking at a long-term investment opportunity, more often than not, your best option will be a second hand property”. – Anonymous
If I had a dollar for every time I’ve read a comment like this over my career I would be a very rich woman.
Whoever tells you a house and land package is a bad investment has either no knowledge in the area, or perhaps bought with little or no research behind them and had a bad experience.
Buying house and land can be a brilliant strategy for building a portfolio. It is the strategy I used to acquire my first four investment properties over a very short period of time. It does however require impeccable timing and copious amounts of research and experience to be executed correctly. Over-capitalising for the area or choosing the wrong builder, land estate, floor plan and inclusions can all spell disaster.
Some of the positives of buying a house and land package include reduced stamp duty, excellent depreciation benefits and a more affordable price point. This makes it an attractive option for the single income earner, first time investor or an investor with tight cash flow.
In this month’s case study we’ll be sharing with you the details of a house and land package we sourced for a client that was purchased for $431,000 12 months ago. Our client has just had the property valued by his bank and the new valuation came in at $460,000. That’s in an increase of $29,000 in just 12 months.
- Single income earner
- Taxable income less than $70,000 per annum
- Approximately $45,000 in savings
- First time investor
- Living with parents paying minimal rent and will continue to do so for the short term
- Can afford $50-$80 per week to put towards new investment property
- Would like to purchase another investment property in the short to medium term
- Low holding cost critical
- Low price point to reduce risk
- Low ongoing expenses (i.e. maintenance etc.) as only one income
- House as property style as lowest risk in terms of ongoing costs
- Young investor so time not as critical as mature investor
- New property advantageous for tax benefits to help reduce holding costs
- 23sq, 4 bedroom, 2 bathroom house with double garage and undercover alfresco area
- Best located estate in the area only 1.5km from a well-established shopping strip
- Good balance of owner occupiers and investors in the estate
- Close proximity to ample existing primary and secondary schools
- Open plan design with 2 living spaces and owner occupier standard inclusions
We identified this estate immediately upon its release as an excellent opportunity for our house and land clients because of its design and location. We completed all our due diligence upfront including an independent valuation to ensure the Developers pricing and the pricing we had negotiated with our recommended builder were not above market value. After completing our homework over a couple of weeks (yes that’s how long it takes) we were fortunate enough to then move forward and place more than 15 of our clients into packages within the estate over the last 12 months.
Some massive capital growth gains across the board which, from a percentage perspective would outdo any “blue chip” Melbourne suburb over the past year. Not to mention they are all getting around $380 per week in rent, meaning that after tax deductions, these properties are not costing our clients a cent
Congratulations to our client and to the PW team.