New vs Old - What do you think?

House and Land:

Buy your land and pay the Stamps on land cost only (once it Titles). Source your builder to build on the land you now own and are paying for. Pay the interest on both your land and the ever increasing progress payments as the Build Loan draws down. This process can take anywhere from 4 months to a year depending on how much you and your builder have your **** together (It does get easier the more times you do it). Sometimes land can take months to even Title. If this is the case this is the best time to line up your build if you haven't already bought your land to suit a specific house. Again easier to identify the more times you do it. Once the house is built and Inspections and Handover have been completed it's now ready to rent.
Costs to hold from start to finish. No rental income until complete. Opportunity cost.
Instant Equity, cheaper Stamps.

Established:

Find, buy, rent.


Fair assessment?

 

Ahhh. Did got what you said in the first go. But not sure on the areas. But Gujju's have awesome business sense.

They can sell anyone anything anytime.

Regards

 

Harris park, Sydney

 

Reasonably fair, I would only add that the low interest cost when combined with the stamp duty saving is cheaper to go H&L. Further shouldn't take more than 4-5months as if buying land OTP you should have plenty of time to organise build contracts. Therefor for a $150k land with $180k build you shouldn't be spending more than 3-4K on interest due to increment curve of debt.

 

Cheaper than what?

 

Sorry that's was a bit unclear.

Should have said that IME the minor $3-4K of interest coupled with the $4.5k of stamp duty ($7.5-8.5k total cost) is cheap entry to property. This is the equivalent of spending $220,000 on established in Victoria.

IMO I feel a $220.000 established investment is not a fair comparison to a $330,000 brand new H&L that would likely Value up at $380,000 on completion. Again given the $220,000 established price would probably indicate strata of some kind, likely a 1bed or studio in a dated building.

 

Of course. But if you're a first time newbie doing a H&L you can get your timing wrong and your timeframe blows out. That's why I added the process gets quicker the more times you do it.
3-4K of interest whilst building plus 4-5 months of obvious vacancy cost during construction adds up the negative $, but if done right you should be 40k up on completion by doing it this way yourself. Harder. But much more worthwhile. And maximising your Depreciation.
Buying a completed H&L package off a builder is a no no because they've already added in that 40k of profit for their holding costs.

 

I have bought land recently in Bardia ( mentioned in this post) and was comparing new vs old but was not aware of this thread.

So in nutshell learned a lot by reading each and every word in this thread.

Thanks ALL for contributing... will share my H&L story once complete.

I am a newbie in Aus market but not a newbie investor .. i have made 3x returns in past and got some wrong investments as well.

 

I'll leave something for everyone to think about....have look what the demographics of what the future clients will want..a clue:

1. Lots migrants who are used to living in apartments...a small 3 bedder is a good send
2. Lots downsizers as the baby boomers retire
3. Well located near transport, shopping, and beaches
4. Low maintenance

Time will tell.....

 

This is nothing new. It's been well documented the points above and more all lead towards smaller household sizes in the future. It's one reason why there is so much development of apartments... Will take years ++ to realise any decent cg..but it certainly will come.

 

The apartment market is well catered for ....but small freestanding houses is not well catered for....

 

That's correct.
You need to source the land and then shop the builder. Another strategy is to buy the land in the early stages of the development/estate if the market is strong with every release the land will rise, so you are making money on the land and build or have the option of perhaps flipping the land if it makes sense

MTR

 

Correct.

 

So what's the consensus now that there have been changes to the amount of depreciation that can be claimed? Old with higher LSR and lower CF, or new with lower LSR and higher CF.

I hadn't paid much attention to depreciation in the past and looked at it as an added bonus, but I went to a spruiker seminar on Saturday and apart from trying to sell his OTP stuff, his cashflows showed that depreciation made a big difference to an otherwise negatively geared property.

 

Where are these properties? Best way to answer the question is to look at the properties specifically.

All things being equal I think depreciation is great for cash flow - The problem is when people pay an extra $100k for a property only because it's 3 or 4 years newer than comparable properties. I think that's like giving away $100k and accepting a few thousand back per year but the capital is never repaid.

 

This was Ian Hosking from Rocket Property selling property all over actually. H&L in Geelong, Dual Occ in Sunshine Coast, TH in Thornlands and Redlands. All overpriced but that's not really my question. I'm just wondering if people are starting prefer newer properties due to the depreciation changes.

 

I have built two untill now. Both are positively geared from day 1.
If I add depreciation on top of it, that's like 80 dollar per week per property approx.

You figure out the returns. Every small return, accounts for the total gain that you are going to get.
And I never overpaid. If you compare it with established houses, yes, may be 20-30k difference. But considering low maintenance, new house, immediate equity and cash flow, its worth it.

Regards

 

Agree with all 4 points! My folks wanted to move into my IP once I renovated it as it is single level and modern. Small is the new big...

 

Ole saying "less is more" applies...from a per sqm basis....smaller properties get much better prices if they are well built.....that is a fact.