We all know the smell – fresh, clean and ready for action. New cars, furniture, and especially NEW HOMES.
And yes, we love the smell of a new home – but that’s not the only reason we love recommending them. As property investors, new homes present some great benefits when entering the market, as well as when you add to your investment portfolio.
Stick around to find out why!
First and foremost, though, brand new homes are all about finding the right piece of real estate. It’s not about buying around the corner or choosing a place that your cousin or your aunt suggested – it’s about finding what’s right for YOU.
Location is all about combining the right amount of knowledge, with an understanding of your unique goals, financial situation, family and long-term objectives.
That may mean buying in a place you’ve never visited before, maybe a new estate, or a regional town. The beauty of having a dedicated research team means that we’re able to identify and recommend properties based on an in-depth understanding of trends, economic indicators, and most importantly, what we can learn from actually visiting.
So, brand new is important, but it relies upon finding the right place for your goals, lifestyle and strategic plan.
You know what they say – location, location, location!
So, still not sure why buying a new home as your investment property? Check out these 4 reasons!
- Adding Equity
What’s a block of land worth without a house on it?
Well, let’s just say this – a lot less than the same property with a house on it!
Building a new house on a block creates instant equity. We’re talking $100K, maybe even $200 or $300K within a couple of years, depending on the location, size of the house and market conditions.
Think of it like this, people often pull down houses and build new ones on blocks in high demand areas, which costs a LOT of money, yet it still creates a huge equity uplift. So, if you’re simply building the house on a piece of land, with no demolition or other site costs, the financial output is much lower to begin with, yet still creates equity of the same notion.
- Tenants
Back to the new home smell – freshly painted walls, new furniture, clean carpets and flooring, it’s really a dream.
People, including us, LOVE new things, and that’s one of the key reasons why the demand for new homes is so high – we thrive off the idea of having new things. It’s more or less ingrained into our minds, with our hyper-inflated desire to consume. So, at the end of the day, buying and building new plays perfectly into this concept, because it provides supply to something that already is in such high demand.
For you as an investor, this means a couple of things.
The first, is that you know you have security in providing something that people want, you own a property that tenants WANT to rent. In a place like where the population is ever-increasing, due to the desire for good quality infrastructure, services and job opportunities, there is always demand for new homes.
The second thing, which is probably the most important, is the idea that people are willing to pay more to live in a new home. As a renter, newness promotes a sense of security, safety and comfort, whilst also making us feel like we’re getting our money’s worth.
So, as an investor, a new home is a win-win situation, tenants love new homes, and you reap the financial rewards.
- No Maintenance Issues
If you’re renting (or have ever rented), you’d be well and truly aware of the problems that can occur with the upkeep and maintenance of older places. From leaky taps to cracks in walls, the older the place, the more hassles for both the renter and the landlord. At the end of the day, no one wants that.
That’s not to say that existing homes aren’t sometimes great options, BUT, with a new home, you know you can trust the build and the quality.
Minimising your out-of-pocket expenses outside of building and renovation is a key factor as a property investor – buying and building can certainly help alleviate this!
- Maximum Tax Depreciation
When looking at how you can claim parts of your property investment back on tax, a new home is your best friend.
The ATO has guidelines for the effective life of products and objects, usually pertaining to things like cars, or computers. BUT, this concept is also applicable to your home. Anything from appliances and light fittings, to bins, have a practical life associated with them, whereby their reasonable lifespan is estimated, and annual depreciation is calculated accordingly.
Using a diminishing value method of depreciation allows for higher claims to be made in the first few years, given the higher rate of depreciation. Think of a car – the costs decrease significantly in the first few years, but then tend to plateau a little, it’s the same with a house. So, the newer the home, the higher the depreciation.
You can also claim depreciation on the capital costs of construction. When building the house, the ATO accounts for 40 years of reasonable use, and can therefore be calculated to depreciate over that time. Ultimately, this allows you to claim back the costs of building, which wouldn’t be possible if you purchased an existing home.
So, at the end of the day, keep in mind the tax benefits of having a new build – it’s definitely worth noting!
As much as we love the smell and feel of a new home – and we certainly feel it, having recently moved into our new Southport office, it’s not the only reason why we love suggesting it for our clients too.
Building a property as part of your investment can be great for your long-term objectives, provided you have a strong plan, good connections, and a strategy that is tailored to your unique goals.
At Propell, we’re all about ensuring that your property investment journey is as smooth and informed as any other important decision in your life. We understand that it can be daunting and uncomfortable when you’re not sure of the situation – but that’s why we’re here, to provide that peace of mind, grounded by strong research and even stronger relationships.
Would you like to chat more about how a Propell Property Plan might suit you? Give us a call on 1300 776 735, or send through an enquiry HERE, we’d love to hear from you!
