Building a Home for Rental Investment
Building a Home for Rental Investment
In previous blogs we’ve talked a lot about the ‘non negotiables’ that are central to every quality building project. Issues like Quality Assurance (QA) and Sustainable Living are top of the list. However, where the project involves building a house for rental investment purposes there are some additional issues that need to be front and centre!
Whilst the construction of your own home is more personal, building an investment property is about making money whether through rental income, capital growth or both. So, in today’s blog we’re going to explore a few key considerations before you consider building a house for rental investment purposes.
- Location location location! – It’s one of our favourite topics because location impacts just about every investment property purchase or building decision. Proximity to local services and facilities such as schools, shops and transport make a property more or less desirable to prospective tenants and will be a key consideration when the time comes to sell.
- Street appeal or the visual wow factor! – Those initial seconds count when making a first impression. Everyone inspecting a property for rental or buying purposes will look at it from the roadside to get a feel for its street appeal. A good street appeal will make a property more inviting and may increase interest in it. This is where good designing pays dividends!
- Rental Yield – Like any good investment you’ll want to make money and maximise the return on investment through good consistent rental income. The Rental Yield for an investment property is calculated by annual rental divided by the purchase/construction price and expressed as a percentage (%). e.g. Price $300,000. Annual rental $15,600 @ $300 per week. 15,600/300,000 = 5.2%. The higher the % the better the yield. Simple!
- Maintenance – Keeping a property in good condition is easy when it’s brand new, however it’s important to keep it presenting well. Take a walk around the property from time to time and note any damage to buildings, walls and features and any maintenance or upgrade issues.
- Depreciation – In simple terms depreciation refers to the decrease in the value of an asset over time due to wear and tear and use. From an accounting perspective it allocates the cost of an asset over its useful life. Let’s use a simple example to explain the concept. If you purchased a brand-new laptop for $2,000 in 2019, if it depreciated by 25% per year it may be worth $0 by 2023. Some may argue it would depreciate at a faster rate given the speed of technological changes, but that’s another discussion. So, getting back to your investment property, then depending on the age of the home and various fixtures within it, those items may be depreciated over time and provide potential taxation benefits. It’s important that you discuss depreciation in terms of your investment plans with a qualified accountant to understand it may impact on your financial circumstances.
- Taxation – In addition to depreciation, general expenses associated with managing and running an investment property may be tax deductible provided certain criteria are met. We’d recommend adding this topic to your list for discussion with the accountant.
This list is just the start and it’s by no means exhaustive. The idea is to show you some of the key considerations when exploring the option of building a house for rental investment.
Rental Yield, Depreciation and Taxation etc are complex areas and require specialised advice from an accountant or qualified financial advisor. Highfields Builder recommends obtaining professional financial advice before making any investment decisions. The information contained in today’s blog is general in nature as every person’s situation is different.
Highfields Builder are your local home building specialists across Toowoomba and nearby regions. We build quality, energy efficient and cost-effective homes for owner occupation or investment purposes. Check us out at www.highfieldsbuilder.com.au and LIKE us on Facebook @ www.facebook.com/highfieldsbuilder
This publication series covers home building, real estate, home finance and legal related issues in a general way. It is intended for general information purposes only and should not be regarded as legal advice. Highfields Builder Pty Ltd recommends that professional legal and/or financial advice should be obtained before taking any action on the basis of the general information presented in this publication.
Written and Published by www.presentprofessionally.com.au
Highfields Builder is your local home building specialist in the Toowoomba region
Scott, Bonni and the Highfields Builder team are focused on building strong relationships with customers and delivering outcomes that exceed expectations. The process of building a home can be complex and every customers situation is different. When you build with Highfields Builder you become part of a team committed to delivering the highest standards of excellence in residential home construction, from enquiry through to handover.
DISCLAIMER
This article may include information on home building, real estate, home finance and legal related issues in a general way. It is intended for general information purposes only and should not be regarded as legal advice. Highfields Builder Pty Ltd recommends that professional legal and financial advice should be obtained before taking any action on the basis of the general information presented in this publication.
Toowoomba QLD 4350
admin@highfieldsbuilder.com.au
Monday to Friday 7am - 5pm
QBCC-1316473
Designed by Working Websites Powered by WebWave