House and Land Packages - A Brief Investment Guide
When you are considering an investing in a property there are numerous articles and expert advice available and it can be hard to know where to turn or what to believe. Full disclosure this is not an extensive guide to investing in house and land packages but we have read and gathered a lot of information to give you an overall idea of the things you should look for and consider before investing in house and land packages in Sydney, Melbourne or any of the other big cities in Australia experiencing population growth.
Financial need
From an investment perspective consideration needs to be made based on your current cash flow and financial set up and whether you can wait for the property to be built before taking a rental income. As unlike established properties house and land packages aren’t move in ready.
However, with that being said a property which hasn’t been lived in before is a unique marketing point and if tenants had the choice between two properties at the same price and one was new no tenant in their right mind would turn down that opportunity.
There are other financial benefits to weigh up in the early decision making stages, such as the money you can save by buying a house and land package. For instance, because the house is newly build you will automatically save money that you would normal have to pay for lengthy inspections on an older property. Another benefit is that depreciation valuations and reports are easier come tax time because the property is new.
Location, location, location
Although the assumption is that house and land packages are usually nearer the city and therefore will produce a higher return for investors it is not always the case. It is a good idea to initially do a recon of the locations you are considering in investing in. If it is not feasible for you to physically go to the area don’t worry as there is a lot of information you can get online beforehand. Firstly check what amenities are around the area. Is the area accessible? How easy is it for people to get to and from the location to the city or to other key destinations within the area and how long does it take? This information will tell you how livable the location is and whether it would appear to renters.
Another good idea is to see whether the locations around the block you are considering are going to be built on in the future. What zoning they have and whether these future changes will affect the rental yield of your house and land investment.
The housing market
Looking into the predictions for the housing market and the economy will give you a good indication on how safe the investment will be. If the number of people renting is increasing due to high property prices and people not being given a leg up into the property market you know that there will be a demand for rental properties.
Furthermore, if there is forecasted population growth in the area and a limited number of rental properties available then you also know that demand will be high.
However because of the downtime during build if the market does take a dip then it could become harder to fill the property at the rate needed to even break even. Therefore it’ll be important to calculate the expected mortgage repayments as well as a worst case scenario taking into account a percentage drop in the marketplace e.g. -10%. Knowing this information will allow you to mitigate against any risk before purchasing a house and land package.
