Investment benefits of building
Building an investment property to fit your purpose can produce long term financial benefits that boost your cash flow. Lets see how building for your next investment property can benefit you…
Depreciation claims on plant, equipment and all capital works
Depreciation relates to the natural wear and tear of your building and its associated assets over time. Within an investment property, you can claim depreciation on plant and equipment assets (easily removable fixtures and fittings) and capital works (structural components).
You can claim every depreciation dollar available for a total number of years on capital works and depreciation for plant and equipment each year as a tax deduction.
The effective life of assets will boost your cash flow sooner
From paint colours to clotheslines, building an investment property gives you the freedom to choose everything. Low maintenance on a property should be a top priority and the effective life of assets should be kept in mind. The effect life of an asset on your property determines the number of years your assets depreciates. The lower the effective life results a higher rate of depreciation.
You can claim depreciation of internal fixtures and fitting on newly built properties which will reduce your taxable income. Stamp duty is only payable on the land before your home is actually built as opposed to the property as an added value. Land usually makes up the bulk of the cost in the property but this can produce thousands in savings. More benefits can be achieved on savings as interest payments made during construction can be tax deductible at your marginal income tax rate.
Cheaper than buying an existing property
A good land and building package could result in a cheaper overall price of investing rather than purchasing an existing property. If you are willing to go through the task of getting your property designed and built by your recommended professional, you can achieve this. A good builder or property developer will be able to break down the steps that you need to take to save on costs and maximise returns.
Meet market trends
A huge benefit to building is the ability to specifically target the market. Researching the types of in demand properties and working with appropriate property professionals will help you build the right fit for the market. If you are looking to buy then sell or become a landlord, this could be a great opportunity to build wealth. Homes that are built to reflect lifestyle opportunities, modern features, and trend expectations will attract potential buyers.
Building to more equity
If you have managed to do a good job on purchasing the right land and building package, you can go back to your chosen lender and have your property revalued once the job is done. Your property could become more attractive on the market with demand and its newly built features. A revaluation could potentially lead to a higher value than your initial investment creating more equity.
Investing in property is generally a great way to build wealth, but remember to always consult your financial advisor before making any big investments, such as building an investment property.