So you’re thinking about building a brand-new investment property, but there’s one thing holding you back: “What about the rent I’ll miss out on while it’s being built?”

It’s a common concern for property investors—after all, with an established property, you can probably start collecting rent from day one. But with a new build, there’s a construction period where no income is coming in.

But what if I told you that this issue is often more perception than reality?

I’ll walk you through exactly why the cost of building vs buying established ends up surprisingly similar, and how a clever approach to stamp duty savings can help bridge the rental income gap entirely.

Let’s break it down

Let’s look at the numbers for a real-world example of a property build we recently worked on with a client in the Brisbane area.

The land cost came in at $590,000, and the construction cost was $487,000. That gives us a total build price of $1,077,000.

Now, the client’s loan had an annual interest rate of 6.26%, which works out to 0.12% weekly.

So what happens during construction?

Over say a  30-week period, interest payments accrue gradually as funds are released. Here’s how it breaks down:

• Land deposit: $59,000 held for 30 weeks = $2,131 interest
• Land cost balance: $531,000 for 27 weeks = $17,260
• Construction deposit: $24,350 for 27 weeks = $791
• Base/Slab stage: $48,700 for 23 weeks = $1,348
• Frame stage: $73,050 for 17 weeks = $1,495
• Enclosed stage: $170,450 for 13 weeks = $2,668
• Fixing: $97,400 for 9 weeks = $1,055
• Practical completion: $73,050 for 6 weeks = $528

All up, the total loan interest during construction came to $27,276.

Now here’s the kicker.

When buying an established property at the same total price of $1,077,000, the stamp duty would be approximately $46,837.

But when you’re building new, you only pay stamp duty on the land component—so in this case, that’s just $21,825. That’s a saving of $25,012 right there.

So if you’re worried about the interest you’re paying while your property is being built, this is your key takeaway:

The stamp duty savings almost completely offset your construction-phase interest costs.

But wait—it gets better.

Under the ATO’s tax ruling TR2023/3, interest on the construction loan may be tax-deductible along the way, as long as the property is being built to produce assessable income. That means the true net cost of building new—when factoring in those deductions—could actually be less than buying established. So you’re not just breaking even—you’re potentially ahead.. You need a top notch savvy accountant on your side too of course.

So, is it a myth that you lose out when building because there’s no rent coming in?

Yes, I think it mostly is.

Once you factor in stamp duty savings and potential loan interest deductions, building new doesn’t leave you worse off than buying an established property. In fact, you may come out ahead, with a brand-new, lower-maintenance investment in a growth area.

As always, the key is careful planning and understanding the numbers upfront.

If you’re considering a new build and want to run the numbers on your own scenario, feel free to reach out—we’d be happy to help.

FAQs 

1. Do I still have to pay loan repayments during construction?
   Yes, interest accrues on the funds as they are drawn down, but not on the total amount from day one.

2. Is the stamp duty saving always this significant?
   The saving depends on your state and property value, but for most new builds, it’s typically $15,000–$30,000.

3. Can I claim interest on the construction loan as a tax deduction?
   Yes, under ATO ruling TR2023/3, if the property is intended to produce income, the interest may be deductible. Always check with your accountant.

4. What happens if construction is delayed?
   You’ll accrue more interest, but the stamp duty savings still apply. Good planning and a solid builder help reduce delays.

5. Is a new build better than buying established?
   It depends on your goals—but from a cost perspective, new builds hold their own when all factors are considered.