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With interest rates at an all-time low, many people are considering building as an investment. Some of the advantages of building new include:
When you build a new property, you get to depreciate the cost of construction of the building over a number of years. You also get to depreciate the internal fixtures and fittings, because everything is brand new.
You can find out what the market wants and what the market is willing to pay a premium for. If you build the right property, it ensures that it would always be rented.
You have the potential to build the property so it could house more than one tenant. You could look at a granny flat, a duplex or a potential subdivision. As a general rule, more tenants means more investment income.
If you can get a good deal on your land and the build, the property could be cheaper. A lot of people are not willing to put in the effort and go through the construction. They will pay a premium to buy an established property.
Building a new investment property can also have the benefit of attracting long standing tenants who are happy to preserve and maintain the new property they have moved into. This reduces the risk of the property being unoccupied and expensive repair bills.
You can go back to your lender following construction is completed to have the property re-valued. If you have paid the right price for the right property, you may be rewarded with an increased property value – instant equity – which can be used as potential leverage into more properties.
You may also be eligible for Government grants and incentives that are geared towards encouraging building. There are long-term and short-term grants as well as relief from costs such as stamp duty.
Speak with your accountant, to see if building an investment property is a great wealth strategy for you.
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