House and land packages are often one type of investment that property investors find too complicated to explore, but as in the case for all asset types, good education and the right guidance are keys to achieving one’s financial goals.
Smart Property Investment’s Phil Tarrant describes house and land packages as “[committing] to the purchase of the land and then you [being involved] in the development of the asset—you're responsible for building that property.”
Naturally, investors get builders to do the development for them, but how does this set-up ultimately affect the value of the asset and the profit acquired in the long run? According to buyer’s agent Paul Glossop, while there are definitely pros in purchasing house and land packages, having many people involved in acquisition means more cost layered onto the purchase price.
“Unless you're buying a property from the person who's selling it directly, there is someone else in there who's not working as a charity, as an NGO, [and] they are essentially making money out of you or out of the vendor,” Paul explained.
“Whether that's going to be a marketing company, whether that's going to be a builder, whether it's going to be a sales agent, someone's making a wedge, whether it be a commission or a flat fee.”
Essentially, the fewer people who are in the pool, the less money an investor is going to pay for the package. The smartest move, for Phil and Paul, remains to be awareness—knowing the people who are going to make money out of the transaction. As to whether the investment is going to be worth its weight in gold still depends on the fundamentals of property investment.
“You need to have full disclosure about who's making money somewhere. If you don't know and it's a little bit grey and you think there's sort of commissions underhand, you should know that information, because otherwise, that's not the right way,” Phil said.
They encourage property investors to get in touch with the Property Investment Professionals of Australia (PIPA) and familiarize themselves with the code of conduct in order to ensure that they are always making good and educated decisions. Moreover, it is also important to know the different factors that influence the cycles of different property markets across Australia.
According to Paul: “[There could be] two different markets, similar intention, and two completely different outcomes. You got to know the data.”
“There's no excuse these days not to be educated. There's no excuse these days for making the wrong decision because the information is there… and I'm very pro using experts to help you build your portfolio and make the right decision, but the fundamental decision still comes down to you,” Phil said.
“You need to make and take responsibility for anything you do in property. You can't outsource responsibility.”
Tune in to Paul Glossop’s Q&A episode on The Smart Property Investment Show to know more about the right program to keep track of your property without going into depreciation, how to decide where to buy and which investment property is right for you, and how to identify opportunities.