Building a property can add additional levels of anxiety to your portfolio, but it could end up saving you money in the long-term, an expert has suggested.
A report by Lonergan in late 2018 saw 39 per cent of potential homeowners decided not to build because of how overwhelming the process is, a rise from the year before at 31 per cent.
However, houseandland.com.au’s general manager Chelsey Quartermain told Smart Property Investment that there can be some hidden savings involved in a new build, and investors should not necessarily dismiss the notion outright.
“The simple fact is, if you’re smart, building a property can save you a load of money, and that also can free up money to be spent investing elsewhere,” Ms Quartermain said.
“You can take the time, analyse the market and find the best options, build the kind of property that will be in demand by renters.”
In terms of where to build, Ms Quartermain said there was more of an opportunity to build a bargain on the west coast of the country.
“There’s a lot of promotions on. It’s a noisy market [and] the builders are competing for your business; [but] they're starting to strip out a lot of those optional extras,” she said.
“That’s a really great opportunity for an investor, because you don’t need all the bells and whistles, so typically speaking, you can get a really good deal.”
She added: “Understand what the renter is actually looking for, and then put together a package that’s quite streamlined and efficient in terms of cost that's going to meet the needs of a renter without going overboard in terms of your optional extras.”
Those who find savings in the building process have the option of passing those savings onto the renter of their property, she said.
Then, investors who get used to the process will know what to expect if they decide to build another property for their portfolio.
The downside to this, Ms Quartermain said, is that investors will need to wait until the property is complete to receive any rental income.
“There might be a limit on where they can invest, but for the right investor in the right market, it could be a really good option for them,” she said.
To explain her point, Ms Quartermain used the example of a pre-existing house and vacant land in South Australia within two kilometres of each other.
An existing one-storey property with three bedrooms, two bathrooms and one car space went for approximately $440,000, while to build a two-storey house with the same bedrooms, bathrooms and car space on the vacant land would cost about $315,000.
When looking at the process, Ms Quartermain said it was a “rational choice for many people”.
“Firstly, the timeliness – most homes are built in 9-12 months, so you’ll move in to a ready-made home within a year. Lots of people are fearful of an 18–24 month wait to move in, but that’s rarely the case,” she said
“Secondly, if you work with a good builder – and there are many – it’s not as overwhelming a process as you might think. It can actually be fun and not take up too much of your time.
“It’s obviously more involved than buying, but not so much that it outweighs the financial and other benefits.”
For those who are looking to build, Ms Quartermain provided her top tips:
Investors looking to build should look at their budget realistically, and should try and avoid optional extras.
“Pick a number and stick to it. You’ll avoid blowouts in cost and time,” she said.
With a lot of competition for businesses, Ms Quartermain said the market was ripe to take advantage of building promotions, with some good deals available for those who shop around.
Investors should also be utilising the services of a trusted builder with a good track record.
“Doing a little research upfront can pay off in spades down the line,” she said.
Being actively involved and part of the process is important to see a build through, Ms Quartermain said.
“The one thing you can’t do is detach from the home building process. It’s not a hassle but it does require your attention – and the rewards are great,” she said.