I’ve had people share their love of the character of an old home. Remember, a decision to buy a property for investment is not a sentimental choice. You won’t be living in it.
Buying for investment is an objective decision, with emotion aside! Save the emotion for when you can celebrate an earlier retirement funded by a passive income.
On the go? Here’s 30 seconds of key take outs:
- Brand new properties attract quality tenants and higher rental returns.
- A new build means less maintenance, freeing up some cash flow.
- You have design control in a new build to attract the tenant you want.
- Interest on your investment loan during construction is tax deductible. You’ll also save money in stamp duty.
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Investor benefit #1: little to very low maintenance on a new build
On a new home build, maintenance is lower. If a fixture, appliance or fitting fails early on, then typically there are warranties in place to cover you for one to two years giving you a grace period. If rental demand is high, tenants will happily pay more rent for a new home. This all means you will have excellent control over your cash flow.
Investor benefit #2: you’ll save on stamp duty and attract tax deductions
Stamp duty is not tax-deductible. For a property investor that means it is an inevitable expense unless you buy a new build and better still, off the plan.
If there are two contracts and you purchase an investment property ‘off the plan,’ you pay stamp duty on the land only.
By settling on a separate land contract first, and a separate building contract later, stamp duty is payable on the land only.
Once you enter into a construction contract for a new build, any interest during construction is tax deductable in the first year the property is leased. Why wouldn’t you?!
Investor benefit #3: you can maximise your cash flow
Your strategic focus is on cash flow. A healthy cash flow reduces risk and keeps your bank or financier happy. The rental income your tenants pay in regularly is your cash flow. Provided rental demand is high and vacancy rates low, you’ll find quality tenants will pay more rent for a shiny new build.
A new construction gives you an opportunity to work with a building designer or architect to design a property to target high paying, responsible tenants.
Investor benefit #4: families make great tenants in the right location
A good tenant is a long term resident with a secure and regular income, who is respectful of property and neighbours and wants to make their local community their social hub. For this reason, younger families make great tenants.
Parents are generally less likely to want to up and move and disrupt schooling. Families are mostly homemakers that are there for the long term, and will take pride in caring for your investment property.
Investor benefit #5: attracts quality tenants willing to pay for shiny new
A tenant that has a good, stable income and is choosing between two or more properties, one of which is brand new and well designed for living, is likely to prioritise your new investment property over an older one.
A generous living to bedroom ratio, contemporary features, fixtures and fittings, finished to quality specifications is very appealing and will often have tenants willingly paying a little more than they otherwise would.
Investor benefit #6: a new construction will give you tax relief
Purchase of a new property attracts tax deductions that can’t be claimed on an older property. A large portion of the tax breaks available on brand new properties accrues in the first 5 to 10 years.
A new build simply makes sense for growing wealth
I can’t make this point any clearer. A new build designed to attract good quality, stable tenants, in the right location is a good investment decision.
Free investor tools: 6 Reasons Why A New Build Is Good PDF | 30 Page Property Investment Guide