It’s a common cause for debate – is it wiser to invest your time and money into searching for the perfect house to buy or smarter to build from the ground up?
There are arguments for and against either option and no one proven winner. The way you can win in the long run is by researching whether to build or buy thoroughly and choose the best investment for your situation.
Factors like budget, living arrangements, move in dates, investment portfolios and personal preference should all be considered. It’s going to be one of the most expensive yet rewarding experiences of your life, so don’t you owe it to yourself to do the groundwork before you take the plunge?
Read on for the definitive guide to whether you should build or buy your next investment.
First things first – is property investment right for you?
If you’re in a position where you’re looking to invest your money, you’re about to be faced with a lot of choices. In Australia, property investment joins shares, bonds and term deposits as the most common areas to grow capital in the long term.
Property investment has been a steady source of income for Australians over the last 10 years, and ASX’s annual report showed an average increase of 8% return. While it’s more expensive to get into than shares or bonds, most property investors choose building or buying because of the predictability and potential for large gains depending on the market.
Don’t treat your biggest investment like they do on TV!
As seen on Aussie Property Flippers, the practice of buying a ‘fixer-upper,’ renovating and selling it straight after is on the rise. It’s definitely one way to invest, but we recommend spending time learning how to build as an owner and owner-building your own house first, so you can learn the ropes without the pressure of gaining capital back over your head.
If you’re still keen to invest in property, you have an exciting journey ahead of you! Here’s how to know whether to buy or build and what you should keep in mind before you start.
Buy if you can’t build it, right?
Before you buy, research your options thoroughly!
Buying an investment property can be a fantastic option if you don’t have the time, know-how and effort to commit to the building process. If you’re looking to buy an investment property and then rent it to tenants, you’ll spend most of your time searching for the right property in the right place.
There’s a lot of things to consider when making sure you don’t invest in a property that never makes it out of negative gearing. If you’re not sure why that’s a bad thing, there’s more information on the different types of gearing here. Consider these as priorities when you buy your investment property:
- Location: If the house isn’t in a growth suburb, it’s not a wise investment. The old saying, ‘buy the worst house on the best street’ isn’t always true – find a home in a location where people are showing interest and are renting above the average median price to get a home there.
- Planning: It’s a great suburb, but is it about to be cut in half by a new tunnel or overpass? Renters are picky and something like industrial machines working around the clock could turn them off or force you to lower your asking price.
- Vacancy rates: Use your local council to research the amount of homes that are vacant in the suburb. There might be a reason people aren’t renting there that isn’t immediately obvious to the untrained eye!
- Rentability: People have a list in their minds when they rent: Is it near schools? Is there good transport nearby? Is it secure? Where can I park my car? Where can I park all four of my cars? Have this list in mind and aim for as many as possible.
- Ready to live: If you’re buying to rent, try to find a home that can be rented immediately. If it needs a lot of fixing up, you’re looking at a building project and might need to reconsider.
Just like any good investor, you’ll spend time researching and finding the best property to spend your precious money on. If your time is just as precious, you can hire property investment experts who’ll search for the right property on your behalf, but it’s more money off the amount you can spend on the house.
If you have time and patience and want to save money, building will work for you. Here’s why.
Build to save money and learn a lifelong skill
Build your own home for less and sell it for more
Building suits investors and owners who have long term investment goals in their sights and want to turn it into a venture they can do again and again. If you can get it right the first time, you’ll end up with an investment that’s cheaper than buying an established property, will always be rented, could be valued for instant equity post build and even designed to accommodate dual occupancy.
Building or buying a ‘fixer-upper’ and renovating isn’t for the faint hearted. Simply put, if you choose to invest in constructing a home, the highest return won’t come from a generic house that’s built off the plan.
When you build to invest, whether it’s to sell straight away, add to your portfolio and rent or for you to move into straight away and sell later, the best investments are designed to suit the block, area, your budget and your deadline. If you cut corners in any of these areas, you’ll end up with a liability on your hands that’s difficult to live in or sell and depreciates quickly.
However, a house that’s built with patience and consideration will be the best investment you can make.
Personalise your home every step of the way when you build
Many people prefer to build or renovate, live in the home for a while and then sell before they move onto their next project. The benefits of building an investment this way are that the owner can make changes to the home according to how liveable it is, from their own experience.
If an owner has built a home that they find too dark in winter, they can add windows to a sun facing wall.
If they’re finding the kitchen is restrictive, they can upgrade it.
If they are lacking in storage, they can add more as needed.
These adjustments are all incredibly valuable when it comes time to sell. It’s not always possible to build the perfect home the first time round, and the adjustments that get it there will not only make it easier for you to live in, but add value when it comes to selling.
If you live in South Australia, there are restrictions for how soon you can sell your house if you built it yourself. If you’d like more information on this, please get in touch with Ralph: firstname.lastname@example.org and he’ll be happy to address any concerns you have about building to invest.
“If you build the right property, it will always be rented”
It’s important to remember when you take on the role of owner and builder, it’s possible you’ll come across problems with the project that challenge your budget and deadline.
We’ve proven the formula to becoming a successful owner builder for long term investment and the fantastic news is that anybody can do it. When you build with Home Together you’ll avoid the risks and proceed through your build in a progressive, functional and enjoyable system.