Building an investment property is one of the wisest financial moves you can make. With the national median rent rising by 11.4% just a year ago, you can be sure of a steady source of income for generations. But did you realise that these profits on investment homes are not guaranteed?
To earn a lot, you must plan intelligently while selecting and building your investment property. Check general principles and real estate market trends to see if your plan is practical. You have a lot to think about and a lot on the line; you can’t afford to make a mistake.
To give you an idea of the process, we have listed the 7 major things you need to consider when building an investment property.
Look for fixed-price contractors
Fixed-price contracts are construction contracts in which a set price for the construction is agreed upon in advance. Some builders may prefer variable contracts, which allow ‘unexpected’ charges to occur during construction, raising the price, but these typically have a limit on them.
Finding a fixed-price contract ensures that there will be no big surprises during construction and can also help you budget appropriately because you will know precisely how much you will need to pay to complete the task. If you are looking for reliable builders for your investment property, contact Hotondo-Best Home Builders in Australia for the best experience!
Invest in high-quality fittings and fixtures
Some builders cut corners on fixtures and fittings (such as lighting, plumbing, and kitchen worktops), lowering the property’s value. Poor-quality features are more likely to break and require repair or replacement in the future, whereas high-quality options not only increase the value of a property but also last longer and cost less to maintain. Not to mention that installing high-quality amenities will help you attract better tenants.
Visualise the target market
What type of tenant are you searching for? Are you seeking university students who will take anything they can get? Are you looking for a young family with amenities such as schools and parks? Or are you looking for affluent singles to stay in your well-furnished home?
Many renters are willing to pay more for modern conveniences and a great layout, whilst others are less concerned and will settle for a house with four walls and a roof. The better your home meets the needs of your target market, the more rent you will likely receive over time.
Enjoy stamp duty benefits
Since stamp duty is only needed on the land component if a house does not currently exist, building an investment property rather than buying an existing one can result in significant stamp duty savings. In the case of an existing house, you’d have to pay duty on both the land and the house.
Maximise tax benefits
Builders of new investment properties can claim considerable depreciation deductions in addition to the regular investment property tax benefits (interest deductions, loan fees, etc.).
Depreciation losses on freshly purchased items such as appliances, blinds, carpets, furniture, and water systems, among other things, can be claimed by investors. A newly constructed property will almost certainly have brand new fixtures and fittings (as mentioned above), which means larger depreciation deductions.
Furthermore, you can deduct the cost of the building’s construction over a number of years, making developing an investment property from scratch incredibly tax-beneficial.
Get a turn-key deal
A turnkey house-and-land package is essentially a house where all you have to do after it’s finished is ‘turn the key,’ because everything else is already done. And by everything, we mean everything, from the driveway to the postbox, to the doorbell, to fences being installed, to flyscreens and air conditioning being fitted.
People who are building a home to live in may opt out of this option because they want to personalise it, but an investment property isn’t personal: they’re strictly financial decisions.
Opt for a good-value construction loan
Finally, if you’re starting construction from scratch, you’ll need a decent construction loan—the lower the interest rate, the more money you’ll save in interest.
Final thoughts
Building an investment property is a great way of ensuring a stable income from renting. By following the aforementioned tips, you can save tonnes on your building project. A lot of it depends on the building contractors you choose. Therefore, make sure to find reliable builders for your property to get the best results.
