Why should you invest in a new build investment property?Written by: Wolfbrook Residential
So, you might’ve come into a bit of money. Or perhaps you’ve been given the time-honoured advice to consistently pay yourself first. At any rate, it’s time you embark on your investment adventure. What’s it going to be? Shares, your sister’s side hustle, or that Kiwi classic – property? Whether you are a fledgling investor who thrives on doing their own investment research, or you’re being guided by a trusted (financial) advisor, you’ll want to make a decision that will bring healthy returns to your portfolio, year in year out.
Read on for 10 reasons you should start your investment journey with a new build property.
1. Transform your interest into an expense
You might have heard that the Government made recent changes about investors being able to deduct interest as an expense, from income arising from residential property. However, new build rental properties are exempt from these changes. In other words, as a new build property investor you would (still) be able to deduct interest costs from the money you bring in from your rental investment.
2. Bright-line perk
As an investor, you take on the responsibility to pay tax on gains or income. In point #1 above, you learnt that a new build waives the tax you might have to pay on your rental income. But there’s more. A 5-year ‘bright-line’ test applies to new builds vs a 10-year period for existing properties. In other words, you only need to sit on your investment for a minimum of 5 years. When you sell after that period, you won’t pay income tax on your gains.
3. Choose a ‘designer’ new build on the best street
New builds are no doubt a sensible investment and that’s not just because they get you tax breaks. If you are selective about where you buy, the gains to be made can be very attractive. Geographically speaking, take care to choose a development in a high growth area. You also want to buy from a property developer who has not spared any detail – from the interior aesthetic, to the architectural attitude, to a deep understanding of market demands in the high-growth postcodes worth watching.
4. Escape the LVRs
In May 2021 the LVR (Loan to Value Restrictions) was changed to a minimum deposit of 40% on an investment property. If you didn’t read the fine print, you’d still be desperately scraping together a down-payment on your first property investment. Luckily, this 40% figure does not apply to a new build. You can discuss a (much) lower LVR with your bank or lending institution.
5. Low Maintenance and Upkeep
One of the tasks of landlordship is keeping your tenants satisfied. While existing buildings may be charming and oozing character, their quirks often bring a host of little problems that need time and attention from both you and your tenants. Flooded garden thanks to clogged or worn out gutters? Established tree branches dangerously encroaching on powerlines? Cracks? Leaks? You name it. A new build is an easy-breezy investment. Because everything is brand spanking new, barely any maintenance means a reduced cost and time investment for you – and indeed, happy, comfortable tenants.
6. Brand new, top of the line
Hand in hand with being low maintenance, seek out a new build that talks about its quality materials and workmanship. New builds have to meet the exacting standards of current building codes, but a promise of quality means that you will be moving forward with a property development company who takes your investment seriously.
7. Ten Year Implied Warranties
The implied warranties set out in the Building Act last for up to a decade. A promise like that signifies that the investment will be built both to a high standard and to the plans.
8. Quality Property = Quality Tenant
A new build has greater rental appeal. Your potential tenants value comfort, design and all the mod-cons. They probably have a lifestyle that asks not to be burdened with upkeep as part of their tenancy. Such occupants will gladly pay for all these privileges.
9. Lower insurance Premiums
Many insurance companies offer favourable prices on a new build insurance policy. Why? Because the most up-to-date building code states the correct construction, plumbing and wiring of a new build – the foundation of any home insurance premium. As it’s likely a brand new structure will hold its integrity for at least a decade, insurance claims should be few and far between.
10. Healthy Homes Standards, check
The new Healthy Homes Standards have put in place minimum requirements for insulation, heating, moisture, drainage, ventilation and draught stopping. You won’t need to facilitate any of these essentials yourself, because they will be part of your new build package.
So there you have it. Ten compelling reasons why a new build is a reliable investment foundation. If you have any further questions about the process or what a new build can mean for you, please don’t hesitate to contact email@example.com. We’ll be happy to advise you.
Oh, and don’t forget to keep an eye out for our property investment guide that we will be releasing very soon. Even better, register now for your copy.