A strategy forms the backbone of your future income through property investment.
Individual properties need to be considered as building blocks and each has different attributes to support different requirements. We need to consider our circumstances, our risk profile, our goals and our time frames to work out which building block will suit us experienced.
Let’s look at the three most common styles of property we might consider:
House and Land Packages
House and Land Packages are the backbone of growing cities and well researched investments have provided consistent growth for many. Let us review their benefits for each stage of our investment strategy.
Biggest Benefit:
Stamp duty on land component only
Biggest Consideration:
No rental income until they are completed.
Acquisition Phase:
They are the lowest risk of the new properties. Each is built as an individual title with the land and title acquired at initial purchase.
Holding Phase:
They offer the lowest level of depreciation as only the house and its fixtures and fittings are included. They are not first choice for taxation benefits.
Exit Phase:
Seventy percent of the market is buying to occupy and this is your resale market. Properties with strong appeal to this sector have the experienced opportunity to deliver capital gains. If you resell to an investor they only want to buy at the experienced price and can shave your capital gains substantially.
Townhouses
Townhouses offer an affordable life style with low maintenance costs that can appeal to the couples of all ages and young families. Appeal increases with private courtyards, nearby parklands for the back yard activities, and cafes and life style venues for weekend outings.
Biggest Benefit:
They are often infill projects and closer to CBDs for capital growth benefits. Medium level depreciation schedules often make the holding phase very attractive.
Biggest Consideration:
Sunset clauses can be lengthy in current lending environment.
Acquisition Phase:
They are a medium risk level in the acquisition phase, as the developer needs to finish all the properties before they can title each one and you can settle.
Holding Phase:
Medium level of depreciation benefits due to community owned amenities and the depreciation of your property. This can make a property valued at $100,000 less than a house and land package have the same depreciation amount and hence easier to hold.
Exit Phase:
Home owners are your greatest resale audience. It is the ease of living and the outdoor spaces that make these properties really work.
Apartments
High rise living can appeal to many and community amenities can increase life style appeal considerably. They are often the investment of choice for taxation benefits due to high depreciation benefits.
Biggest Benefit:
High to huge depreciation benefits. Maintenance included in the Owners Corporation fees.
Biggest Consideration:
Sunset clauses can be lengthy in current lending environment. Management of community amenities needs to be professional to avoid Owners Corporate fee increases.
Acquisition Phase:
Apartments have the highest risk as there are so many variables in the developer’s acquisition, financing, building, and sales and marketing phases. All the apartments need to be finished and titled before you can settle on yours.
Holding Phase:
Apartments have great the highest depreciation schedules especially when they have lifts and community amenities such as pools and basement car parking. This can make them easy to hold.
Exit Phase:
Home owners in many suburbs now consider apartments for long term living. Do your research at open houses and new developments and ‘upgrade’ to ensure additional appeal supporting capital gains.