Buy & Hold Property Investing
When it comes to making money with residential property, there are three core investment strategies to consider; renovation, development and buy & hold investing.
So which one is better?
Well the proof is in the pudding – or more specifically the numbers! In other words, if the numbers stack up and you make money then it must be a good strategy.
The fact is, we’ve got clients doing exceptionally well using all [and a combination] of these strategies.
A better question to ask is; which strategy is best for you?…
Well, if you have a passion for property, ample spare time, a keen eye for finding and negotiating deals as well as competent project management skills, then renovation or property development might be for you. You certainly have the chance to make larger short term gains with these ‘active’ style strategies – however keep in mind the flip side to chasing larger profits is usually more debt, greater capital outlay and an increase in your overall risk.
If however you are time poor [that’s most people these days], don’t have an appetite for risk, and are ultimately more interested in achieving your investing goal than the type of property you buy, then a passive ‘buy & hold’ strategy is for you.
Unsurprisingly, most people are best suited to buy & hold investing.
>> If you’re interested in learning more about this tried-and-tested investing strategy you may want to read our latest property eBook – in it we lay out the exact buy & hold system you can use to build a passive income of at least $83,200 per year, buying just 4 average-priced investment properties.
Done right buy & hold investing is the easiest, safest and surest way to generate a reliable and ongoing income from property.
This brings us to another question – what do you buy?
Well, when it comes to buying most things, new is usually better. Whether it’s a car, television or handbag, new items are likely to last longer, be of higher quality and be more reliable than something which is older.
But can we apply the same rule to residential property?
Here are 8 reasons why buy & hold investors should consider buying new property…
Why invest in brand new property?
1. Higher Rents & Lower Vacancies
Who doesn’t love new? Tenants sure do! In fact, they’ll pay a premium to secure a brand-new [never before lived in] property.
You’ll also attract a better quality of tenant, such as professionals, who will be more likely to look after your property and stay on for extended periods.
2. Lower Maintenance & Running Costs
As the property is brand new, you will also benefit from minimal maintenance costs. Appliances and other fixtures are unlikely to break in the first few years, so you don’t have to worry about expensive repair work or replacement costs.
Newer properties also tend to be more energy efficient compared to older properties, ensuring your ongoing energy and running costs are lower.
3. Greater Choice & Customisation
Whether you’re buying a new house & land package, townhouse or apartment there’s usually a selection of properties you can choose from. This means you get to pick out the property location and style that is best suited to you.
Not to mention, with new property you can often make adjustments to the properties internal layout, colour scheme and fitout as well as the external façade prior to the property being built.
4. Time & Capital Growth [Apartments Only]
Buying a new property off-the-plan also allows you to enjoy longer settlement times. Typically, an apartment building can take around one to two years to get built, giving you extra time to save a larger deposit and improve your overall financial position.
You also get to lock in today’s prices so by the time settlement arrives, your property might be worth more, in which case you’ll have access to immediate equity that you can put towards purchasing another investment property.
5. Stamp Duty Savings [House & Land Packages Only]
When you purchase a brand new house & land package you only pay stamp duty on the land value not the total package price, whereas with existing property you need to pay stamp duty on the full purchase price.
Keep in mind you will incur some holding [interest] costs with a house & land package as your new property is being built, however in most instances the stamp duty savings will be considerably larger – providing you with savings in the thousands of dollars.
One of the biggest financial benefits of buying a new property over an older existing property is depreciation.
New properties offer significantly higher amounts of plant & equipment and building depreciation, allowing you much larger deductions against your taxable income. In total, the difference in tax deductions between a new and existing property can end up being in the tens of thousands of dollars.
7. Statutory Protections From The Builder
Builders of new properties in Australia are required to take out home warranty insurance which protects you in the event of a major building defect.
Also, most items for a new property are under warranty which means you can minimise your ongoing costs as they are covered by builder’s warranty insurance.
8. Government Incentives
When buying a new property, you could also be eligible for Government incentives such as the first home owner’s grant and stamp duty concessions. The incentives differ per state, but a new property could end up saving you thousands of dollars on your purchase.
To find out exactly how much you could save, simply check out the local government website for the state you are going to buy in.
While there’s no ‘one right way’ to invest in property, the numbers tell us that investing in brand new property can be very advantageous – more rent, lower vacancies, less stamp duty, government incentives, minimal maintenance costs, structural guarantees, and the potential for built-in equity gains all add up to a more rewarding and profitable investment – not to mention one that’s more convenient and hassle free, which is particularly important if you are looking to invest outside of your home state.
For more info or assistance with finding and investing in new property please call Sam on 0411 431 391
Sam, Matt & Andy
Adelaide Finance Brokers + a lot more…
PS. We’ve created a property investment coaching program to help guide you through the process of building a profitable property portfolio – for more info click here