House & Land

The benefits of building your own House and Land package, over acquiring an existing property

Building your own home through a house and land package offers several advantages over purchasing an existing property. Here’s why taking on a construction project could be a better investment strategy:

1. Cost Savings

  • Stamp Duty Savings: When building, you only pay stamp duty on the land, not the entire property, which can result in significant savings.
  • Interest Rate Advantages: Low interest rates can make financing the land and construction more affordable compared to buying an established home.

2. Increased Profit Potential

  • Capital Growth: By building a new property, you create an opportunity for increased market value, as new constructions often attract a premium.
  • Customization: You can design a home that meets current market demands, which can lead to higher rental income or resale value.

3. Tax and Depreciation Benefits

  • Depreciation Deductions: Newly built properties offer better depreciation benefits, which can help reduce your taxable income.

How Does the House and Land Package Process Work?

Step-by-Step Process

  1. Two-Part Contract:

    • Land Purchase Contract: Sign a contract to acquire land from the owner.
    • Construction Contract: Sign a separate contract with a builder for the construction of the home.

  2. Financial Setup:

    • Secure a loan for the land and another for the construction.
    • Make a 10% deposit on the land and settle the remaining 90% upon completion.

  3. Construction Loan Drawdown:

    • Funds are released to the builder in stages as construction progresses.

Key Construction Stages:

  1. Contract Signing: Initial deposit for construction.
  2. Slab Stage: When the foundation is laid.
  3. Framing Stage: Walls and roof structure are completed.
  4. Lock-Up Stage: Bricks, windows, and doors are installed.
  5. Fit-Out Stage: Interior work, including bathrooms and kitchen, is finished.
  6. Completion: Final inspection and handover of the property.

Important Considerations When Building

Choosing the Right Builder

  • The builder coordinates the construction process, ensuring materials are sourced, trades are managed, and quality standards are met.

Contract Essentials

  • Fixed Price Contract: Avoid contracts with provisional sum or prime cost items that could lead to budget blowouts.
  • Time Accountability: Ensure the contract includes deadlines for design, approvals, and construction completion.
  • Liquidated Damages: Include compensation terms if the builder delays the project.

How Property in Demand Can Help

End-to-End Support

  • Research: Identifies the best investment opportunities based on market trends.
  • Strategy Development: Helps clients align property investments with financial goals.
  • Implementation: Assists with financing, legal processes, and construction management.
  • Monitoring: Tracks property value and market opportunities to maximize returns.

Client-Centric Approach

Property in Demand focuses on delivering quality investment properties that offer growth potential. By working with external professionals, they ensure all aspects of the investment process are managed with expertise and transparency.

Conclusion

Building a house and land package can offer financial advantages, better returns, and more control over your investment. With the right support and strategic planning, it can be a powerful tool to grow your wealth and achieve long-term financial stability.

 

How does the Process work?

There are two contracts for a house and land investment, often referred to as a split contract. You will sign a contract to acquire the land from the vendor or land owner, plus sign a contract with a builder for the construction of your house. You will need a loan for the land, and a separate loan to build your house.

Buying Your Land

You will require a 10% deposit to exchange on the land and the remaining 90% will be required upon settlement of the land. Once you have purchased your land, you will need a construction loan. Building Your Investment Property. A  construction loan requires funds to be drawn down at specific stages of the building process and paid to the builder. This allows the builder to continue on to the next stage of the construction.

The typical Stages of Payments to a Builder are:
1) Signing of the building contract – the construction deposit is paid;
2) When the slab is poured;
3) Once the frames (walls) and trusses (roof) have been erected;

4) At lock up stage; that is, the bricks, windows and doors are completed and installed;
5) Finishing of the interiors, bathrooms and kitchen; and
6) Handover or completion of the property.

The Construction Process

The most important part of building your investment property:

Choose a Builder
The principal role of a builder is to co-ordinate the building works. The role includes supervising each trade, sourcing, quantifying and coordinating
delivery of materials. Most importantly, the builder quality assures the entire process.

Preparing a Building Contract ,including Drawings and Inclusions Standard contracts are available from many sources including industry bodies such as HIA
(Housing Industry Association) or MBA (Master Builders Association). The contract forms the basis of your legally binding agreement with your
builder including any dispute resolutions. 

Construction Supervision and Certification

 The inspection and certification of your investment property at critical stages, while under construction, is required by law to confirm that the property is built in accordance with the approved plans, specifications, relevant
Australian Standards, Building Code of Australia and council regulations to ensure the structural integrity, health, safety and amenity. These inspections can identify and rectify problems or omissions before they are built in.

Handover
This is where you undertake a final inspection of your property with the builder. At this time, you may identify construction defects, including incomplete works. You can instruct the builder to rectify any significant material error before you make your final payment and before your property is ready for a tenant.

There are a few key components of your build contract that need to be considered and discussed with your builder before entering into an agreement. It is important to remember throughout the process the cost of the build is being financed by you and not the builder.

Negotiating the Right Building Contract

Understanding what is not in a contract is as important as what is in the contract. While you think you are signing up to a fixed price contract,

you may in fact be exposed to items which are deemed only estimates and are subject to change once your building works have commenced.

There are very limited time obligations on a builder to commence construction of your investment property. For example, once a builder receives

your deposit, they are responsible for preparing your drawings and obtaining approval. There are however no time limits placed on the builder

when they should prepare these drawings to obtain the approvals.

Key Components you should consider when Negotiating your Building Contract:

1. Fixed Price Contract – Eliminate as many contingencies as possible Ensure there are no Prime Cost or Provisional Sum Items in your contract. These are estimates which may increase over the course of your construction works. The contract price should include costs for  approvals before, during and on completion of construction. All reports required to be obtained for approval for the plans and construction of your property

should be included in your contract price (e.g.:

Surveys, peg outs, landscape reports).

 2. Accountability of Time – Ensuring your builder is working in a fair manner to complete your investment property The contract should include maximum

requirements of time for:

a) The builder to prepare the drawings,specifications and approval documents

b) The builder to provide copies of relevant approved documents for your financial institution so they can approve your loan to commence construction

c) A time limit to commence the construction of your property

d) Maximum time period to complete your property.

3. Liquidated Damages – Receiving adequate compensation for a builder taking too long to build your home If a building contract has accountability of

time, it is only fair to be compensated for any delays. Including an amount for liquidated damages assists you with any additional costs incurred, such as interest costs for delays too your construction works caused by the builder.

Where PropertyinDemand can help?

PropertyinDemand adopts a ‘clients first’ philosophy. It is a simple concept that suggests when a client is satisfied; they will do business with you again.
The objective of Silverhall is not only to provide you a quality property, but more so to provide an investment tool that will grow in value. Research
PropertyinDemand has a dedicated research team monitoring the changing property environmentsaround the country. Both risks and opportunities are identified and recommendations are made accordingly. Research is not just for acquisition purposes.

Strategy
PropertyinDemandl helps clients to see property as a tool to achieve certain financial goals. Implementation PropertyinDemandsupports clients in all areas of the
investment process. From reviewing the research behind an investment to assisting where required with the finance, the legal process, property defects, insurances and managing agents. PropertyinDemand does not offer those services internally, but deals with professionals in all areas.

Monitoring
PropertyinDemand will monitor the investments of clients and keep them informed as to current values and corresponding opportunities each and every year.

Variety
PropertyinDemand sources a variety of developments in a number of locations such that clients in different situations can find the investment tool to suit
their needs.