5 Tips For Building An Investment Property

The property investment landscape is changing rapidly and uncertainty in different market factors has resulted in more need than ever to seek expert advice before investing in property. While this uncertainty can create confusion, it is also an opportunity for savvy investors to utilize a number of different strategies to maximize their profits. Some of the more effective strategies involve adding value to an investment property.

The popularity of ‘house flipping’, where investors buy a sub-optimal home and renovate it to sell, has exploded in recent years and has been buoyed by a number of ‘reality’ TV shows like The Block. However, renovating an existing property has a number of pitfalls, with most people finding that budgets are blown out of the water, or that the renovations become all consuming. There are better ways to add significant value to an investment property, while providing considerable tax minimization benefits at the same time.

• 1. Pick a growing suburb

Finding the right suburb is one of the most important aspects of ensuring you maximise your profits. There are a number of key indicators to look for when choosing the suburb you will build in, and with the right data and support, it isn’t nearly as arduous as it first seems. Make sure to access property sales reports for the last 10 years, making monthly and yearly comparisons to identify market peaks and troughs. Consider suburbs on the outskirts or in line with other developments that have planned infrastructure upgrades construction. Properties within close proximity to planned schools, train stations and shopping centres often see investment growth.

• 2. Find the right builder

The most crucial aspect of building your investment property is finding the right builder. A great builder can add thousands of dollars to your investment, along with saving hours of stressing over potential issues. Focus on quality. Research locally, through Google and the QBCC for builders with solid reputations and that understand the type of vision you have for your investment. Don’t be afraid to ask questions and keep an open line of communication with your builder at all times.

• 3. Customise the home for the market

Building your investment property from scratch allows you the freedom to customise all aspects of the land, designs and fixtures. If you are looking to rent it out, look at demographics of renters in the local area — how many children do they have, what is the average income? The final touches you put on your investment can sometimes mean the difference between profit and loss. Don’t skimp on fixtures and decide whether you would want to rent or sell the property furnished or unfurnished.

• 4. Make use of financial incentives

If studied properly and carried out with the right assistance, purchasing a vacant property and building a new home to rent out or sell can be one of the more financially rewarding property investment strategies. Take the stamp duty savings alone. For example, a four Bedroom house and land package costs $500,000, with stamp duty of roughly $15,000. If the same block of land costs $200,000 to purchase with no home, the stamp duty falls to nearly $5000, a saving of around $10,000 for an investor. Any interest paid on your loan amount may also be tax deductible as well.

• 5. Engage a Financial Adviser

Purchasing a vacant block of land and cultivating it through to a finished and profitable investment is a long and complicated process. Your local financial adviser will help design and implement the right property management strategy for your personal circumstances. Some of the most beneficial aspects of building an investment property come in the form of financial concessions and benefits. A Financial Adviser will be able to discuss with you the tax minimisation possibilities of depreciation along with the claimable expenses and other deductions available for your personal circumstances.

Building a new home on vacant land doesn’t have to be a minefield. If professional advisers are engaged early and no stone is left unturned in seeking the latest information, you may find that your property management strategy will benefit greatly from the extra effort.