House and land for an investor is straight forward. Go to your local master planned community, choose a block of land from the sales office that suits your budget and then walk the main street where display builders are and choose the one that is the best value for money. Done. Not even close.
When buying any investment property you need a budget which is often defined by your borrowing capacity and serviceability. i.e. what you can borrow. Buying a block of land and then choosing a builder is a good way to blow your budget. You have no idea what it is going to cost to build your house or if you think you do then you may be in for a nasty surprise. A builder cannot give you a build price until they have done a contour survey and soil test on your lot. This takes 3 weeks from when they can get access and only then can a builder give you a fixed price. Sometimes you need to build a double storey house instead of a single storey house which will cost you an additional $30,000 fo the same size house. To avoid this costly mistake buy the house and land in a fixed price package
One of the biggest choices you are are going to need to make is deciding between choosing a larger lot size with a smaller house to fit within your budget or choosing a smaller lot size with a larger house for the same amount of money. This is a common conundrum and the only answer is to assess the return on your investment and cashflow. When buying a larger land lot you will get a lower return on investment and the cashflow will therefore be lower and often negative. This is because tenants will only pay a small additional amount of rent for a larger lot which leads to a lower return on your property. In terms of capital growth larger lots appreciate at a similar rate to smaller lots so there is no advantage of buying a larger lot unless the land is sufficiently large enough to subdivide at a later stage and then you would need to build the house on one side of the lot. Check the local town plan for minimum lot size allowable and whether there is a covenant that has been put in place by the land developer to restrict it.
Another common stuff up is choosing the lowest price house and land package. One thing we have learnt about property is that the lowest price is never the best deal. House and land packages often exclude items, have different lot and house sizes, varying land prices and build inclusions so when you are making comparisons they are never like for like. Build contracts also differ between builders with varying key contract conditions often resulting in unforeseen costs later on for the unsuspecting property investor.
So you think you have chosen your house and land package and after a couple of days you decide to go shopping around for a better price. You go down to the land estate and wander through the sales office and see rows of builder prices in the window and you can't believe your eyes; prices up to $30,000 lower than your package. Lucky you came down to the land estate to do your homework. WRONG. How can you trust anyone. The TRUTH; builders don't have to include everything in their build price and often leave out items amounting to 10% of the total build price such as landscaping, flooring, driveway, lighting and air-conditioning.
Alternatively you go online and find the same result. Other house and land package prices lower than yours and some even with your lot number. What is going on here? Retail builders that have displays in the estate are allowed to advertise house and land packages on the land developer's unsold land. These advertisements are often left online even after the land has been secured by another builder exclusively. Once again they often do not have all build inclusions in the price. i.e. not a fixed price, turn key build package. Like we said the lowest price is never the best package. Beware of 'click bait' online ads designed to get your attention just like low price hooks advertised outside display villages in land estates. Your smarter than that.
No one wants to make a stuff up as a property investor. Some people are so worried about making one that they put off buying their first property until they are well into the forties or even their fifties. In life you sometimes need to make mistakes to learn and grow as a property investor.
If you are one of those people who is petrified or just need reassuring on what to do next then contact us. We love helping people get into property and overcoming what has been holding you back.