Are you someone who tends to invest in property? Then you will want to make sure that you can do so with minimal risk to yourself. Building a property portfolio means working through an eye-watering number of challenges and considerations. It also means trying to understand what you are buying into, and how you will pay for it. As an investor, then, building a new home can be a challenge – especially if you are going to pay for the investment with rental income.
If you were to buy a pre-built property, you could rent it out ASAP and cover the cost of your purchase with your tenancy. However, if you are buying a property using a new house and land package agreement, there is no home to rent out for the foreseeable future. While land and house packages in Sydney offer the best value and the greatest opportunity for co-operative consensus among everyone involved, it is by no means the perfect choice for every investor.
You have to be sure that you can cover the cost of your investment yourself for the duration of the process until the home itself is built and therefore ready to be rented out.
Many people make the mistake of investing in new house and land packages, only to find out that they cannot finance the deal using rental income.
Staying on top of your house and land package as an investor
First off, you have to make sure that you can currently tackle the cost of your construction loan. This will mean probably having to dip into savings or using some of your other investments as collateral. However, just remember that once you have paid for the home and it is now rentable you can recoup all of those costs for pure profit and make back all of the money you have had to invest from your own pocket.
Really, the main difference is that you cannot make rental money from the immediacy of the deal being completed. You will have to make sure that you can start planning properly so that you can cover the cost of the loan until your property itself is ready.
Luckily, the vast majority of home and land packages in Sydney can have the property built for you within a shorter period than you might expect. Therefore, you might need to find short-to-medium term financing with the knowledge that you will be able to recoup the costs and turn a profit more or less from the day the property is rentable.
So, if you are a home investor in Sydney and have looked at custom home designs via land and home packages, make sure you have the finance there to capably handle the process. It might not seem like a big deal, but you will thank yourself for showing the needed due diligence to avoid a headache down the line.
Investing in a new property is hard work – don’t make it extremely hard on yourself, though, by investing in a project you cannot sustain until completion.