Any property investor will tell you there’s nothing like the thrill of choosing a new property. But when you’re starting out, how do you know which investment property is right for you?
Age, size and location aside, property investors essentially have three main options: traditional house and land packages, apartments and townhouses. Where it gets fascinating is deciding at which stage you should purchase the property: will it be a completed property ready to go, custom built, or off the plan?
To help you decide, let’s take a look at their pros and cons:
1. Completed property
Completed properties are ready for settlement immediately. So when you buy, you know the value of that property, which lowers your investment risk. Completed properties can also come with a known rental return – it may even be advertised with the property to appeal to investors. Some may even have tenants already in residence.
When you buy a completed property, you can claim tax benefits immediately after settlement – only one or two months after purchase.
2. Custom-built property
Custom-built properties are generally made to order. This means you can customise the layout, fittings, fixtures and design to suit your goals. Typically, you start by just purchasing the land, which means you only pay stamp duty on the land rather than the completed property. For many, this is an attractive advantage.
3. Off the plan
Buying “off the plan” is increasingly popular. It means you enter a legally binding contract to buy a property before it reaches the final development stages.
This might sound risky (and it can be), but it comes with many advantages. Purchasing at the planning stage is typically much cheaper than when the development is completed. Traditional deposits aren’t always needed, and there can even be government incentives and grants. All of which make buying off the plan an easy way to enter the market. Also, because the property settlement may be one or even two years down the track, you have time to structure your finances and portfolio to get ready.
On the flipside, there’s always a risk with “buy now, pay later”. You don’t know what the property will be valued when completed. And you may not get what you paid for – or thought you paid for.
This is only the beginning. Once you’ve decided on the type of investment property, you need to consider the location, size, design and more. Just remember the golden rule: always buy with your head, not your heart.