New builds or ‘buying off-the-plan’ represent attractive property investment opportunities. Investors can enjoy tax depreciation, lending, security and other benefits. Read on as we explore six reasons why new builds may be the smarter choice.

1. Tenants prefer them

There is no question that those looking to rent property are more likely to want, and pay a premium for, a new house. So it could just be that you have your pick of a good bunch of applicants - every landlord’s dream - and it can lower your risk of having dodgy tenants to deal with.

You’ll probably find that tenants will be happy to stay longer in the property as well as there isn’t any possibility of an upgrade from a brand new home!

2. Land affordability

Typically, land in a new subdivision is cheaper than a residential site in an existing suburb, which means your initial outlay is the lowest price for the property, and of course you will be adding plenty of value by building a house on it.

Any new subdivision done right will have solid capital gains as the area grows and develops over time - which means long term you will have an extremely valuable asset.  

3. Higher depreciation claims

Good tax advice is essential when buying an investment property. When it comes to new builds chattels, fixtures and fittings will be at their highest value when you purchase them, and will depreciate from there - meaning your tax rebates in the first few years will be at a greater amount than they would be for a second-hand property (of the same price).

4. No maintenance requests 

With everything brand-spanking new in the property, there will be little-to-no maintenance  required for the first few years, so income will be greater with less outgoings. Risk of large repairs will also be a lot lower, meaning less stress for you worrying about what could go wrong - a common issue when buying used stock. In the unfortunate event that something does go wrong early on, you also have warranties and guarantees to lean on.

Something else to consider when deciding to invest in a new or previously owned property: Some property management agencies also charge a disbursement fee (8.5 per cent of the contractor's invoice) to arrange a contractor to undertake repairs and maintenance. This is on top of their standard monthly management fee.

5. Lower lending rates 

There were significant changes to LVR rules in 2016 which meant investors now have to have a 40 per cent deposit for residential property. However for new builds (completed within the previous six months) 80 per cent lending is still possible, so in essence, your equity can go twice as far. This is probably a very attractive opportunity for first time investors - as a 40 per cent deposit can be quite a struggle when you’re already paying a mortgage on your own home.  

6. WOF-ready

There has been plenty of talk over recent years around rental homes needing to meet certain requirements/undergo ‘Warrant of Fitness’ type inspections, and in 2015 the Government announced that by 2019 all tenanted properties would require floor and ceiling and insulation to a specific standard. So of course, with a new home this would already be in place due to current building regulations.  

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So now you’ve decided on a new build - which is going to be the best option for you and your money?  There are a few different ways to approach it, from turn-key builds to land and house packages, or finding your own site and employing an architect to draw up plans for you. Each choice has pros and cons, and it will be about weighing up many factors like where you will be looking to invest, your budget, what initial deposit you can make and the return you’re after.  

If you are thinking of adding  a 'new build' to your property portfolio, then you may want to revisit your responsibilities as a landlord.