There are many different options available when it comes to investing in property. If this is something you are interested in, a house and land package could be quite appealing. This provides you with a cost-effective and convenient approach that will cut out a lot of the stress that comes with building your own home. Through grouping together a number of the processes involved, both money and time are saved. This is why house and land packages for investors have become so popular. However, as is the case with anything in life, there are a few disadvantages that need to be considered when determining whether or not this is the right investment option for you.
Benefits Of House And Land Packages
Let’s begin by taking a look at the different benefits that are associated with house and land packages.
Simplifies The Process
Perhaps the biggest advantage of purchasing house and land packages for investors is that it is going to make the process of building a new custom home a lot simpler. This is because you do not need to look for a block of land first and then find the right builder for the job. Instead, you are able to tick both of these boxes off at once and you will have a point of contact to help you through the entire process.
It is worth pointing out that you are still going to have two contracts, i.e. you will have a construction contract and a land contract. Nevertheless, the contracts will be with the same vendor, which streamlines the process. It is also going to be a lot easier for you to navigate the council approval process, which will be in place in a lot of cases.
Cost Savings
You can make some considerable savings by purchasing a house and land package. So long as the construction has not yet begun on your new property, you are only required to pay stamp duty on the land part of the purchase. Moreover, there is the First Home Owner Grant for first-time property buyers, which is $10,000 on new properties in New South Wales.
From an investment standpoint, tenants love homes that are new and energy-efficient, as it makes their living costs a lot lower. You may also be able to claim your investment’s full depreciation. When it comes to the financial side of things, the construction loan and mortgage on the land tend to be grouped together, with the repayments set against construction milestones. This means that you do not have to worry about paying the full amount back until the property has been completed.
Experienced Builders
Another excellent benefit associated with house and land packages is that the builder is already going to be familiar with the area of land that you are purchasing. This means that they will be able to use their expert knowledge when it comes to putting together the best design plans that are going to suit the block of land you are purchasing.
If the land is situated on a slope or it has an unusual shape, the custom home builder can provide you with designs that will adapt to these conditions. This will ensure that the possibilities that are available to you have been narrowed down effectively so that you can concentrate on the exciting part of customising your property.
Master-Planned Estates
The final benefit that is worth taking into account is that you are going to be part of a new and exciting community if you move into a house and land estate. A lot of these master-planned estates come with new facilities, and as an investor, your tenants will love the new shopping areas, parks, and medical centres.
Drawbacks Of House And Land Packages
Now that you know all about the many benefits that are associated with house and land packages, it is important to consider some of the cons.
Poor Location
Firstly, you could find that you are in a compromised location. This is because the vast majority of these house and land packages are situated on city outskirts. This is in areas that have an abundance of land. These locations tend to lack infrastructure and have weaker economic drivers. This means that it can be more difficult to come by capital growth. Of course, this is not always the case. However, it does highlight why you need to choose these packages with care and consider the location carefully.
Uncertainty
Many people do not like the uncertainty that comes with buying a house and land package. You are not really going to know whether you will be happy with the surrounding houses and facilities or the quality of the finishes. Uncertainty is also present in terms of the final bank valuation. Will it stack up?
You also need to consider land value as well. Logically, when investing, it is advisable to search for a property that has a high proportion of land value. This is what drives capital growth. Nevertheless, for new properties, most of the value is not in the land but in the building component. This can have a detrimental impact on capital growth as the building depreciates.
As you can see, there are both positives and negatives that are associated with house and land packages for investors. If you’re interested in securing a house and land package as an investment, consider these positives and negatives to help form your decision. If you have any further questions, please contact our friendly team of experts for more information.