Hello everyone!

How are you all doing out there?

I am Kate Hill as always bringing you, I hope, the best and certainly unbiased and honest content on property along with fantastic hints, tips, location guides.

Stay tuned to hear about a bit of a myth about not receiving rent when you are building a brand new property.

So given the severe shortage of housing stock, you’re thinking about building a brand new investment property, but there is one thing holding you back.

What about all the rent I’m gonna miss out on while it’s being built?

Now it’s a common concern for property investors.

After all, with an established property, you can probably start collecting rent from day one or whenever your tenant moves in.

But with a new build, there’s the construction period where no rent is incoming.

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

So in today’s video, I’m gonna walk you through exactly why the cost of building versus buying established ends up surprisingly similar and how a clever approach to stamp duty savings can help bridge the rental income gap entirely.

So let’s break it down.

So let’s look at the numbers for a real world example of property of a property that we built recently, we’re working on it with a client in the Brisbane area.

This is real, I am not making these figures up.

So the land cost came in at five hundred and ninety dollars thousand dollars.

The construction was four hundred and eighty seven thousand dollars.

That gives us a total build price of one million and seventy seven thousand dollars.

Now this particular client’s loan had an annual interest rate of six point two six percent, which works out to point one two percent weekly.

That is an important figure to know so that you can work out what your holding costs are going to be.

So how does this work during construction?

Over, say, a thirty week period, that’s pretty average, interest payments accrue gradually as funds are released.

So here’s how it breaks down.

Bear with me here, peeps, because I want to take you through it.

Okay?

Land deposit, fifty nine thousand dollars held for the full thirty weeks.

That is two thousand one hundred and thirty one, dollars in interest.

The balance on the land cost is five hundred and thirty one thousand dollars held for twenty seven weeks, seventeen thousand two hundred and sixty dollars.

Next, you’ve got your deposit, for the construction, which is twenty four thousand three hundred and fifty dollars held for twenty seven weeks is seven hundred and ninety one dollars.

You’ve then got the base or slab stage, forty eight thousand seven hundred dollars, also for twenty three weeks is one thousand three hundred and forty eight dollars.

Frame stage, seventy three thousand and fifty dollars for seventeen weeks, one thousand four hundred and ninety five dollars.

You’ve then got what we call the enclosed stage, one hundred and seventy thousand four hundred and fifty dollars for thirteen weeks is two thousand six hundred and sixty eight dollars.

You then have fixing.

It’s ninety seven thousand four hundred dollars for nine weeks is one thousand and fifty five dollars.

And then finally what we call practical completion seventy three thousand and fifty dollars for six weeks is five hundred and twenty eight dollars in interest.

Now all up, the total loan interest during that construction phase of all that that I’ve been talking about is twenty seven thousand two hundred and seventy six dollars So here’s the kicker.

When you’re buying an established property at the same total price of one million and seventy seven thousand, the stamp duty would be in Brisbane approximately forty six thousand eight hundred dollars.

But when you are building brand new, you are only paying stamp duty on the land component.

So in this case, that is just twenty one thousand eight hundred dollars.

That is a saving of twenty five thousand dollars right there.

So if you are worried about the interest that 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.

And wait, it gets better.

Under the ATO’s tax ruling TR 2023/3 interest on the construction loan might actually be tax deductible along the way as long as the property is being built to produce assessible income.

So that means that the true net cost of building new when factoring in those deductions could actually be less than buying established.

So you are not just breaking even.

You’re potentially ahead.

This isn’t dreamland.

As I said, I’m not making this up.

This is real.

You need a top notch savvy accountant, of course, on your side to advise you.

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

Well, I think it is a bit of a myth.

Once you factor that stamp duty saving in, potential loan interest deductions.

Building new does not leave you worse off than buying an established property.

In fact, you might actually come out ahead with a brand new lower maintenance investment in a growth area.

Always as always, right, the key is careful planning and understanding the numbers upfront.

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

Obviously, we’re gonna be happy to help.

And, of course, you can run that scenario on any example.

It doesn’t have to be over a million dollars.

You can make it a six hundred and fifty thousand dollar example or an eight hundred and fifty thousand dollar example.

There are locations out there where you can build brand new from as little as six hundred and fifty thousand dollars in a great growth location.

So do let us know if you’d like more information.

Now as always, everybody, I am gonna keep you posted on all things property from around Australia as our year progresses.

Don’t forget to hit like and subscribe if you are enjoying the free content.

I’ll admit today was a bit of a sales pitch, but what are you gonna do?

I will see you all soon.

Bye.

Hello everyone!

How are you all doing out there?

I am Kate Hill as always bringing you, I hope, the best and certainly unbiased and honest content on property along with fantastic hints, tips, location guides.

Stay tuned to hear about a bit of a myth about not receiving rent when you are building a brand new property.

So given the severe shortage of housing stock, you’re thinking about building a brand new investment property, but there is one thing holding you back.

What about all the rent I’m gonna miss out on while it’s being built?

Now it’s a common concern for property investors.

After all, with an established property, you can probably start collecting rent from day one or whenever your tenant moves in.

But with a new build, there’s the construction period where no rent is incoming.

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

So in today’s video, I’m gonna walk you through exactly why the cost of building versus buying established ends up surprisingly similar and how a clever approach to stamp duty savings can help bridge the rental income gap entirely.

So let’s break it down.

So let’s look at the numbers for a real world example of property of a property that we built recently, we’re working on it with a client in the Brisbane area.

This is real, I am not making these figures up.

So the land cost came in at five hundred and ninety dollars thousand dollars.

The construction was four hundred and eighty seven thousand dollars.

That gives us a total build price of one million and seventy seven thousand dollars.

Now this particular client’s loan had an annual interest rate of six point two six percent, which works out to point one two percent weekly.

That is an important figure to know so that you can work out what your holding costs are going to be.

So how does this work during construction?

Over, say, a thirty week period, that’s pretty average, interest payments accrue gradually as funds are released.

So here’s how it breaks down.

Bear with me here, peeps, because I want to take you through it.

Okay?

Land deposit, fifty nine thousand dollars held for the full thirty weeks.

That is two thousand one hundred and thirty one, dollars in interest.

The balance on the land cost is five hundred and thirty one thousand dollars held for twenty seven weeks, seventeen thousand two hundred and sixty dollars.

Next, you’ve got your deposit, for the construction, which is twenty four thousand three hundred and fifty dollars held for twenty seven weeks is seven hundred and ninety one dollars.

You’ve then got the base or slab stage, forty eight thousand seven hundred dollars, also for twenty three weeks is one thousand three hundred and forty eight dollars.

Frame stage, seventy three thousand and fifty dollars for seventeen weeks, one thousand four hundred and ninety five dollars.

You’ve then got what we call the enclosed stage, one hundred and seventy thousand four hundred and fifty dollars for thirteen weeks is two thousand six hundred and sixty eight dollars.

You then have fixing.

It’s ninety seven thousand four hundred dollars for nine weeks is one thousand and fifty five dollars.

And then finally what we call practical completion seventy three thousand and fifty dollars for six weeks is five hundred and twenty eight dollars in interest.

Now all up, the total loan interest during that construction phase of all that that I’ve been talking about is twenty seven thousand two hundred and seventy six dollars So here’s the kicker.

When you’re buying an established property at the same total price of one million and seventy seven thousand, the stamp duty would be in Brisbane approximately forty six thousand eight hundred dollars.

But when you are building brand new, you are only paying stamp duty on the land component.

So in this case, that is just twenty one thousand eight hundred dollars.

That is a saving of twenty five thousand dollars right there.

So if you are worried about the interest that 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.

And wait, it gets better.

Under the ATO’s tax ruling TR 2023/3 interest on the construction loan might actually be tax deductible along the way as long as the property is being built to produce assessible income.

So that means that the true net cost of building new when factoring in those deductions could actually be less than buying established.

So you are not just breaking even.

You’re potentially ahead.

This isn’t dreamland.

As I said, I’m not making this up.

This is real.

You need a top notch savvy accountant, of course, on your side to advise you.

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

Well, I think it is a bit of a myth.

Once you factor that stamp duty saving in, potential loan interest deductions.

Building new does not leave you worse off than buying an established property.

In fact, you might actually come out ahead with a brand new lower maintenance investment in a growth area.

Always as always, right, the key is careful planning and understanding the numbers upfront.

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

Obviously, we’re gonna be happy to help.

And, of course, you can run that scenario on any example.

It doesn’t have to be over a million dollars.

You can make it a six hundred and fifty thousand dollar example or an eight hundred and fifty thousand dollar example.

There are locations out there where you can build brand new from as little as six hundred and fifty thousand dollars in a great growth location.

So do let us know if you’d like more information.

Now as always, everybody, I am gonna keep you posted on all things property from around Australia as our year progresses.

Don’t forget to hit like and subscribe if you are enjoying the free content.

I’ll admit today was a bit of a sales pitch, but what are you gonna do?

I will see you all soon.

Bye.

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