A house + land package is one of the most popular – and easiest – ways to buy a new home. It bundles together the buying of the land and the building of the home into a single purchase. This streamlines the process and reduces the risk and uncertainty usually associated with building. While administered as one transaction, a house + land package generally involves two separate contracts with two different companies. One is with the developer, who provides the land and builds the surrounding infrastructure (roads, sewerage systems, utility connections, etc.). The other is with the builder, who will be responsible for completing the actual construction works.
There are two main types of house + land packages you will see advertised
Standard packages include a vacant block of land and a proposed design by the builder. These packages offer the greatest flexibility as the design can usually be customised to suit your plans or requirements. They also tend to be cheaper to buy but will require some time to be completed and start producing income.
Financing options: usually require two loans – a regular mortgage for the land and a construction loan for the building. This means the land can be paid for upfront and construction costs can be paid in stages throughout the build. It also means you only accrue interest on the amount you have actually drawn down on for the property. For ease of administration, these two loan components are usually bundled together (e.g. one loan contract, one monthly repayment, etc).
Turnkey packages include a completed home on a defined block of land. These packages are generally seen as the safer option, as there is minimal risk of unexpected costs or delays. Also, while they are usually more expensive, they are ready to be rented and can start producing income straight away.
Financing options: Turn-key packages are essentially the same as an existing home, they are generally eligible for a regular mortgage. This means the full payment is processed upfront and you will start paying interest on the full amount straight away.
Are House + Land Packages a Good Investment?
Depending on your investment strategy and goals, yes, a house + land package could be a good option. In fact, when compared to existing properties, a house + land package offers several important benefits:
- Greater control over the design
Most standard house + land packages allow you to customise the home’s floorplan, styling, and quality of finishes. This means you can adjust the design to make sure it matches the expectations of renters looking in the area. It also means you can make targeted upgrades to help increase the property’s rental appeal and potential resale value.
- Lower maintenance costs
As the property will be recently completed, everything will be new and there should be minimal need for repairs. The property will also be under warranty, which means the builder is responsible for fixing any issues that do develop. Greater tenant appeal: If they had the choice, many tenants would pick a new home over a comparable older one. Moreover, most would pay a premium for the privilege, knowing the property should be in perfect condition. As such, new properties tend to be easier to lease out and can achieve higher yields when they are.
- Significant upfront savings
Stamp duty can add thousands to your property purchase costs and usually needs to be paid upfront. However, when you buy a standard house + land package, you only pay stamp duty on the land value. This, combined with a lower purchase price, often make house + land packages much more affordable than comparable existing properties.
- Ongoing tax benefits
As an investor, you can claim depreciation of your investment property as a deduction on your yearly taxes. This acknowledges the impact of wear and tear, and can apply to everything from construction costs to fixtures and fittings. As depreciation is highest when the property is new, a house + land package allows you to maximise your deductions.
- Potential for capital growth
House + land packages are usually offered in expansion areas, where the land value is generally lower. However, as these areas develop and infrastructure is built, land values usually increase, pushing up house prices. This is particularly true in multi-stage developments, where the first properties built in the area usually achieve the greatest growth.
Importantly, buying a house + land package also requires less effort than purchasing the land and arranging building works separately. As it is one transaction, the cost will usually be fixed, which helps mitigate the risk of budget blowouts. Contracts are also negotiated and signed upfront, which provides greater certainty and requires less ongoing administration.
What Should I Look for When Choosing a House + Land Package?
As with any investment property purchase, it is important to do your research when buying any house + land package. Different developers offer different inclusions, so you need to make sure you understand exactly what you are signing up for. We recommend paying particular attention to the:
- Planned local amenities
House + land packages are often located within expansion areas, where much of the local infrastructure is still being built. As such, it is important to check what services (e.g. schools, parks, shops, transport connections) will be available nearby. This is something future tenants will want to know and could help boost capital growth as the community develops.
- Reputation of the developer and builder
If you are buying a turn-key house + land package, you will be able to check the quality of construction. However, if the property is not built, you will need to look at the builder’s previous work (display homes, etc.). You will also need to make sure they are financially stable and capable of finishing the project as planned.
- Quality of fixtures and fittings
The price quoted for standard house + land packages is usually based on the most cost-effective finishes the builder offers. However, you may want to upgrade these to make the property more appealing and suitable for future renters. That said, this will add to the total cost, so you will need to make sure you are not overcapitalising.
- Inclusions and exclusions
Exactly what the price of a house + land package covers can vary significantly depending on the builder. For example, it is common for builders to treat fencing, driveways, landscaping, and even carpets and blinds, as added extras. As such, you should read the contract carefully and confirm what you are getting and what else you might need.
If you would like to know more about our House and Land Packages on offer, please contact us by phone, email or contact form below.
for Expert Property Investment Advice
1300 022 482