Which is right for you? Investing in Design & Build vs House & Land
So, you have decided you want to build a property empire. Congratulations, education is one of the very first steps towards starting your property investment journey. The question of whether to go for a house and land package or go down the design and build route has an ever-changing answer. When making this decision, long-term thinking is key; which option is going to result in the best return on investment?
In this blog post, we’re going to analyse the benefits both options yield from the perspective of industry professionals, delivering valuable insight on brand-new property investments.
Is property investment right for you?
Housing markets are known for their return on investment (ROI) when it comes to long-term profits. Someone may buy a house for very little and then see that price skyrocket and double in ten years’ time, giving them fantastic ROI when they decide to sell and move on. This is the main reason why property investment remains popular today.
How do investors or property owners help ensure a good return? Generally, people buy or build homes in attractive areas and hold them for a long period of time, waiting for the price of their property to rise with the market before they sell it again. It’s tangible, and that’s an attractive option for anyone looking to expand their assets. However with building new, you can add value much quicker than ten years by adding value to the land by building. Because of this, some property investors sell their brand new builds immediately after completing a build – read Lisa May’s story on how she builds and flicks properties off immediately.
Other investors choose to invest by renting out their home while getting capital gains by owning the home for a longer period of time. By investing in a brand-new build, you are providing one renting family with a warm new house to call home. This also means less maintenance work required for you. When it comes time to sell, the process will be much faster and easier. Finally, with the stricter rental laws making themselves known in New Zealand, you’ll neatly avoid the hassle of bringing an old home up to code standard by building from scratch.
Should I invest in House & Land Packages or design a new home from scratch?
If you’re thinking of investing in a brand-new home, one of your first questions might be whether to invest in a house & land package or design & build a home from scratch.
Buying a House and Land Package
One of the biggest advantages of house & land packages for investors is the cost of a house & land package is more controllable than building from scratch because the land has already been evaluated by Classic Builders, compared to when you supply your own land and there are many unknowns. If you choose a house & land package, chances are your home will be surrounded by other brand new homes within an attractive neighbourhood, which can increase the potential for a high return on investment.
Payment options are also more favourable with house & land packages, especially for first time investors. With house & land packages, you only need to put 10% down and they pay the rest on completion, compared to design and build which have a six-stage payment system. This is also desirable for families who may need to pay their own rent or mortgage while building an investment home.
What about investing in apartments?
Apartments can be offered as part of a house and land package with Classic Builders, and offer some surprising perks for investors. Apartments can be more cost effective (thanks economies of scale!) which can offer an attractive rental yield. For some, the smaller spaces and closer proximity to neighbours means there can be less damage to the rental property. Some apartments can have slower capital gains due to not owning land, so if capital gain is your endgame, an apartment might not be the best investment choice for you.
Make sure you do your homework around body corp fees- if you would like to rent out the apartment, factor the body corp fees in when calculating your rental yield. Also consider whether the apartment includes car parking, something that might be desirable to future tenants or buyers.
Designing and Building from Scratch
If you’re aiming to create capital gain on top of inflation gain from the property market, building a new home from scratch alongside our home builders could be the best choice for you.
Choosing to design and build a new home also allows for a lot of flexibility. You can choose a great section in a desirable neighbourhood, then build a home that suits the needs of the average tenant perfectly, justifying higher rental rates when the time comes. If you choose a suburb where house value is on the rise, you can decrease the wait for your payoff by a sizeable margin. You have a lot more choice around the colours, shape and size of the house. This flexibility means you can make some clever choices based on what is selling faster or bringing in greater rental yields in the market at the moment. You also have more negotiating power around pricing than a house & land package where the price is set.
Make the right choice for your property investment.
We offer a wide range of house and land packages as well as design & build options. Talk to the team at Classic Builders today.