If you’re considering building an investment property, it can be difficult to know where to start.
While a property portfolio may be a little tougher to achieve than it once was, creating wealth through property investment can be a very real and achievable goal for many Australians.
From securing finance and finding the ideal block of land, to choosing the type of development you want to build and finding the right builder to construct it — good planning and advice is paramount in each stage of the investment process.
Whether you choose to knock down an existing house and build new, embark in a dual-occupancy development, or build on a promising empty block in a new estate, it’s important to lay down a strong foundation that will help you to make informed decisions about your investment from the beginning.
The key to success is to invest in areas that show positive capital growth potential, offer high rental yield and are attractive to prospective tenants.
If you're considering buying to rent or sell, you’ll need to research suburbs and make sure you're likely to get a good return on your investment.
Consider the key factors that determine a property’s intrinsic value: location, land size, design, history, local community, socio-economic environment, local amenities, transport and proximity to employment. It’s these factors that will ultimately affect your rental return and the success of your investment.
You will also need to ensure you have a clear picture of your finances. This involves more than plugging numbers into a mortgage calculator. You want to look at your monthly income and outgoings and weigh up what you can afford to live on and where cuts need to be made.
Don’t forget to factor in expenses like stamp duty, mortgage fees and insurance costs. Research what grants and discounts might be available, particularly if you’re a first-time homebuyer. It’s worthwhile getting a financial advisor’s advice.
Most importantly, make sure you engage an experienced builder like Metricon who can reduce the stress and complications often associated with property investment.
If you’re looking at a generous block, it stands to reason that by subdividing and building multiple dwellings on it, your profit margin has the potential to increase.
Metricon specialises in these kinds of knockdown rebuild, multi-dwelling and dual occupancy opportunities in suburbs well-served by public transport, schools and shopping strips. Not all local councils allow sub-divisions, so make sure you do your homework. Check your Section 32 and building covenant. A builder like Metricon will be able to help you find the right block and navigate town planning and permits.
There are also more affordable pathways out there for first-home buyers. There is a wide offering of house and land packages aimed explicitly at first-timers that can kick start the process.
Plus, if you choose to build a new home as an investment property you have a range of depreciation costs available to you. You can depreciate the cost of the actual construction of the property, as well as the fittings and fixtures inside the home. This could be the difference between a positively and negatively geared property.
Also consider investing in a display home. Finished to the highest standard to attract buyers, they’re often put on the market at a great price while opens are still in play. That might mean earning a rental return from the builder, with repairs covered during that period. Once it closes, you can then decide to rent or sell.
It's essential to keep your eyes on the prize when building an investment property. Remember the smart money focus. Check your project is feasible. Will rental or sale return in the local area measure up against the cost of land, demolition and building expenses?
For Metricon customers Shane and Bridget Yole, building investment properties was a simple matter of getting value for money.
The couple initially built an expansive family home with Metricon in Malvern East for their family with four kids, and after being impressed by the smooth process, it encouraged them to embark on an investment journey. They have subsequently built three side-by-side dual occupancy properties with the company.
“I think there’s an advantage to DualOcc, because you’re really getting bang for your buck,” Bridget said.
“You’re essentially knocking down one house and getting two.”
“One of the great things about a dual occupancy is you have various options having the two houses,” Bridget added.
“You can say, ‘The market’s not doing well, let’s hang on to them both’ or ‘The market’s doing well, let’s sell one and hang on to the other’ or you can sell both.”
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