While many investors choose existing properties for their portfolios, new builds have the potential to offer even bigger profits and better tax benefits if you buy in the right area.
Property investment expert Danny Buxton of Triple Zero Property Group says buying a new build means investors can be strategic and create something which perfectly meets the needs of local tenants prepared to pay a higher rent for a new home.
Buxton, guest presenter on the 26 August webinar hosted by Hotspotting, says new builds offer good tax depreciation, low maintenance costs and lower periods of vacancy.
With new properties investors can claim more of the upfront costs and expenses including bank costs, as well as depreciation on the building and fixtures & fittings which could be written off over ten years.
“In the first 5-6 years there is increased depreciation which will give really good cashflow,” Buxton says.
His three tips for working out the best location for investment is to look at:
· current and predicted population growth,
· infrastructure spending, and
· Local facilities and amenities such as schools, medical facilities and shops.
Buxton says recent studies reveal about 40% of property price growth can be explained by what is happening in the broader market, but the remaining 60% comes down to individual factors such as the location, housing style, design and inclusions.
He says this is why one of the biggest benefits of investing in new property is the ability to ensure it has everything renters are seeking in a particular area.
“The other reason we like new properties is there is very little ongoing maintenance required,” he says. “Maintenance can be a big burden. Many people don’t realise if you have an older property you need to budget around $5,000 a year in repairs or maintenance because things can go wrong and be quite costly.”
Buxton warns investors to remove emotion from selecting a property for investment purposes.
“Make sure that you don’t buy with your heart, you buy with your head,” he says. “Unfortunately, we see a lot of people who buy because they love a particular area and to me investment is not about what you like, it is about where you make money.
“Investing in property is all about numbers, it’s about understanding the data and having the right team around you.”
He said one of the biggest mistakes investors make is not obtaining independent advice before buying.
“To build your portfolio, you need to build your team,” he says.