Main

The Advantages and Disadvantages of Building Vs Buying an Investment Property

Date:
By  Scott Pfeiffer
 
The main advantages of building compared to purchasing a completed property are:
  • There is usually immediate capital gain on completion of the property (i.e. the property is usually worth more than what it has cost).
  • The investor has a brand new property (more attractive to prospective tenants).
  • Land can be purchased in growth areas which can lead to better prospect of capital growth than established areas.
  • Lower transfer stamp duty (e.g. in WA, land $150,000 stamp duty $3,200; completed house purchase price $380,000 stamp duty $12,600. In NSW, land $160,000, stamp duty $4,100; completed house purchase price $460,000 stamp duty $16,200.
  • May have less ongoing maintenance than an established property.
  • Higher depreciation claim for fixtures and fittings.
  • Using reputable good quality builder experienced in building properties suitable for tenants – investor knows that the property is structurally sound, the colours are modern and neutral (suitable for tenants), builder uses high quality long wearing appliances, fixtures and fittings.
  • Home Warranty insurance covers the building structure for 6 years after completion.
     
The main disadvantages are:
  • Interest costs during construction (although these are tax deductible) - depends on time taken to complete construction. This can be affected by wet weather and availability of tradespeople during building booms.
  • Availability of suitable properties in established areas (more likely to find a completed property in these areas).
  • Completion of construction depends on financial strength of builder – e.g. if builder ceases trading during construction, another builder has to be found to complete the work, leading to additional costs.
     
Start your investment journey now!

Pfeiffer Property is a complete property investment professional advisory company. We help with goal setting, finance, property selection and we support our clients throughout the process of purchasing an investment property and beyond. From decades in the business, we have developed a tested network of property experts including mortgage brokers, accountants, builders, property managers and financial advisers. You can relax knowing all your bases are covered.
 

Book your consultation with Scott today for a friendly and completely obligation-free chat about how you can use residential property to provide for your long term future.