WA House and land. Joondalup Perth ?

Hi,
Me and my partner looking to take our first step into investing in real estate. We have been looking at house and land packages in joondalup area priced between $380000 - $450000 the plan is to purchase the property as home owners with FHB allowance and live in the property for 6 month before rentvesting. While all this is going we will be saving a deposit for our second investment property. As couple we consistently save $1500 dollars a week at this moment in Time. Which we plan on doing so until our circumstances change.

It would be nice to hear Everyone’s thoughts and advice on this strategy please ?

 

I presume this is with financial goals in mind. One firm vote for "Definitely no" here.

Why do you think it is a good idea? You have to ask yourself what makes it perform better than another given property?

 

How old are you @Robb_18 if you don't mind me asking?

 

30 my partner is 25. Why would my age be relevant to this ?

 

I saw your username with 18 and you said partner so assumed not married. My immeditate thought was some planning around the structure the properties would be bought in is all.

 

I would be looking for a sub and sell opportunity to get started, personally.

Generate cash 2 or three times over, purchase an asset with a low LVR and let it sit.

Rinse, repeat.

 

Hi Rob,

My initial thought with H&L is generally no. Not saying it can't work, but generally the growth is slow, you're competing with a lot of similar product when it comes to renting it out, and there's no opportunity to manufacture any kind of equity. In the Perth market atm we're seeing new builds/houses in estates consistently coming in way under value, and with rents low it could be quite some time before you get any kind of growth or cash flow from it.

Without knowing anything about your situation (deposit/plans/servicibility etc) I'd suggest buying something you can add value to, or split, or do something a bit more active will give you better results over the longer term.

 

The reason behind house land is with the property being a new build we will save on maintenance cost for a number of years. With that I’ve be doing some research into the infrastructure and joondalup 2022 plans to make joondalup north west region CBD. Also the hospital, university and a lot of schools in the area Joondalup has the fundamentals of a property which will perform well over the years. Im thinking it could be a good investment to buy and hold and let the capital accumulate on the property to then use as leverage in reinvest into more properties.

 

I wish I was 18 buddy. Thank you

 

Hi Jess,

First of all thank you for the reply.

Secondly me and my partner have now saved $80000 and we are currently saving $1500 a week. This is the situation we are in at the moment. We both work FIFO and have a very good monthly income between us and feel now is the right time to start planning for the future and getting out the rat race.

 

100% agree with you there I'd just do some research before you lock into a new build - while the FHOG cash for a new build is attractive, I'd suggest it's not enough of a reward to make buying a potentially sub-par investment worthwhile.

 

O

 

Hi mate, with your current savings and income(s), i'd say you could buy a lot better established property with a proven record of capital growth in a better suburb. Also remember that if you are buying a new home and live in it first, you cannot claim any depreciation benefits once you convert it to an IP. You're on the right track, keep doing your research and educating yourself. And most importantly listen to the smart people in this forum!

Hoo roo

 

Is this true?

I know of friends who bought a new place (Dont think it was house and lack package) in 2014 lived there for 2-3 years, in 2017 lived with their parents and rented the place for 6 months out and then claimed depreciation based on the depreciation report.

So im assuming you cant do this with what you state here ?

 

From 1 July 2017, unless you are carrying on a business of property investing or are an excluded entity you cannot claim for depreciation of second-hand plant and equipment in rental premises used for residential accommodation.

These changes apply to second-hand plant and equipment you acquired at or after 7.30 pm (AEST) on 9 May 2017 unless you acquired them under a contract entered into before this time. Additionally, you cannot claim for plant and equipment installed on or after 1 July 2017 if you have ever used it for a private purpose"

Rental property expenses

Edit* The above applies for P+E but im not 100% sure on capital deductions, any accountants shine a light on this? I cant be assed calling the ATO again

 

Hi @Robb_18 ,
Curious to which suburbs around Joondalup are doing these H&L packages.

 

In my opinion, the problem with this approach is that you could be describing any one of probably tens of thousands of properties in that greater area. What would make your H&L package more desirable and in short supply compared to the many others out there?

And buying on the outskirts means more land will eventually be released and even more supply of the same product you've bought.

Plus I think its very debatable whether new properties actually save much on maintenance - I own both new and old in my portfolio and anecdotally I'd say the maintenance costs are not far off each other.

The general consensus is on here (apart from some very specific strategies) is that buying an established property is much better financially, even taking into account the FHB bonuses...

 

Never buy an investment looking to lose money while getting a tax break! You'll get plenty of chances for tax writes off in life without looking for it. House and land has lots of hidden costs which hamper growth, this includes:

• GST on the build and land (4-6% of the value);
• 10% POS contributions to Local Government;
• Rep sales commission and marketing budget (up to $35k+/-);
• Developer's and Builder's margin (targeted 15%-25% the value);
• Govt utilities taxes (rates, land tax, headworks, infrastructure contributions)
• Financier costs

and the list goes on. This is why the property industry is huge for government!

When buying an established property, these expenses have already been amortised into the market price.

On the supply side, you'll also be surrounded by many homogeneous properties that are all sitting with high levels of gearing. In established areas market factors such as price growth and principle payments help to reduce the mortgage stress of locations. In newer areas, as everyone has recently purchased, you don't have this luxury. This is why it is common to see higher mortgage default rates in H&L areas and slower for market conditions to recover.

H&L does have a place, but I've only seen them work specing into a rising market - using small deposits to tie up blocks waiting for them to settle. The strategy is more of a 'high leverage' rising market conditions play than educated investment.

 

I’m a new home consultant Rob who looks after first home buyers and as much as I’d like your business - I wouldn’t advise building a new home in a land estate as your best investment opportunity. Granted the money you are on and saving there is a range of options that you could be looking at.

Northern corridor has a lot of subdividable property opportunities - perhaps buy and keep front house and sub divide rear block, demo, subdivide and sell land parcels, or if you really want to and have the servicinility subdivide and build a rental at the rear.

At least buying your investments as investments you still have your first home owner benefits come the time you do want to buy or build your own home to live (providing they are still around) aaaand there are whispers we might be seeing a $15k FHOG coming next year.

There are a lot of double/triple sites in the norther suburbs and if you can find one with a tenant it’s going to allow you to save on holding costs while you organise all your subdivision applications etc

 

Partially correct - plant & equipment (ovens, cooktop etc) can not be claimed on properties purchased after budget date, however depending on age of property (particularly if new as per OP query) the cost of build (div 43) is still claimable. Ie slab, frame, bricks, walls, roof, plumbing etc which is majority of depreciation.
Suggest check with the QS companies who are mentioned as to your specific example if unsure.