Are you contemplating if building a new structure on your piece of land is the right choice? Going for this approach gives you many benefits as an investor. You get your own builder and do some research about what the trends in real estate are, what people are willing to pay for. You want to do everything right to ensure that investing in property would give you a higher ROI from the tenants you wish to attract. Your newly-built property should be perfect for your intended market.
What Is the Process of Building on an Investment Property?
It starts when you purchase a piece of land with the intent of building a house on it with a specific design in mind. In involves finding a builder who will work on a contract for a period of several months. Usually, the construction company oversees the building process, while a bank pays them for their work. Other people ensure the building structure is done to specifications, such as building inspectors, building certifiers, and bank value’s. You also need the Council approval of your plans.
Your builder will update you on the progress of the construction of your investment property. The entire process is easy and exciting, creating new opportunities to invest in other locations. A smart real estate investor acknowledges the importance of diversity in locations, which is also beneficial in the investment portfolio.
What Are the Benefits?
Here are four reasons why building your investment property can give you financial gains even though there are many other attractive houses for sale out there:
- You have the opportunity to get instant equity. It means, after buying land and building a property, you may have it re-valued to your lender. If you get a great deal acquiring your property and do an excellent job of building the right property, you can immediately add value to the place and obtain instant equity. You may be able to use that equity for other investments such as leveraging more properties.
- Create a dual property. You can build an investment property that accommodates more than one tenant. You may also opt for a granny flat on your property. It is one of the benefits of building an investment property compared to buying an already-established property. You can construct a house anywhere you want on the property and decide on the architecture that will allow you possibilities in the future.
- You qualify for depreciation. You can depreciate the construction cost of your newly built property for a period of years. The good thing about property depreciation Sydney is that you can also include the fittings and fixtures in your claim considering that everything is brand new. Also, if you have a positively geared property, you can maximize your tax benefits.
As the value of your investment property increase over time, it is inevitable that the building structure also experiences normal wear and tear. You can apply for depreciation deductions for this natural damage and be able to claim it under plant and equipment as well as capital works deductions.
Plant and equipment refer to the assets that you can remove from your investment property such as blinds, carpets, hot water systems, etc. On the other hand, capital works deductions include the building structure and permanently fixed items like doors, cupboards, sinks, and many others. Note that although most investors may apply for depreciation on investment property, the ones who construct a new house often receive higher deductions.
- Attract many tenants. Besides depreciation, another benefit of building an investment property is you will attract a lot of tenants. Make sure your property is clean, stylish, convenient, and low-maintenance. Depending on the current market and your location, your property should give you a low vacancy rate and a steady rental yield.
When investing in property and building a new structure on it, there are many crucial factors to consider, ensuring you reap financial rewards. Learn everything about this type of property investment, including property taxes, market trends, potential risks, returns, depreciation, price, and so on. Also, the builders you choose contribute to how long your property can weather many years of use from renters, as this impact your rent revenue.