EMAIL # 212 -15TH APRIL 2023- 'BUILDING A NEW HOUSE CAN BE A GREAT INVESTMENT"
I’ve built hundreds of new homes and set numerous sale price records along the way.
One of the biggest joys of my job is handing over a newly completed house to the clients and their family. There is nothing quite like the thrill of moving into a new house. It can be a life changing experience and a very solid investment in a family’s future.
My experience over the last 35 years has repeatedly demonstrated the significant benefits in buying an old run-down home that can be demolished and building a high quality, well designed new house.
My family has been the lucky benefactor of this “knockdown and rebuild” process several times and this firsthand knowledge is now being put into action by my adult children.
Our formula has been to buy a not so desirable property in a good location and develop it into a state of the art, highly desirable family home, that we live in for 2 to 4 years before selling.
“It’s good to have people in your life who you don’t want to disappoint.” Warren Buffett
Below is a link to a real-life example of the financial benefits of building a new architectural house in a desirable location, which prompted me to write this article.
(Crazy sales result but true!)
Here are some tried and true benefits of building a new house.
- Scarcity of good land.
Well located properties that are suitable for demolition are always in short supply and rapidly increase in price. Land is a scarce resource that is only going to become more and more scarce. If you are lucky enough to own such a property, it is important for you to make the most of its potential.
- Maximize your properties potential.
Designing and building a new house is possibly the best way to maximize a properties potential to grow in value. The key is to invest in “timeless architecture”, use the latest building techniques and technology and the highest quality of building you can afford.
- Future proof your house.
Avoid using trendy materials, details and finishes that could age and deteriorate with time. I’m a strong believer in designing houses with clean simple lines and using high quality materials that look just as good 15 or 20 years down the track.
- An investment in family and lifestyle.
Building a new house is a life changing event for the whole family which can open up a whole new lifestyle. However, this will require a significant investment that must be managed correctly.
Below are some related articles that will help you to make good decisions.
“How do I choose the right architect?”
“What are the five 'must have' designs features for a new home?”
“How do I choose the right builder?”
- Tax Free Capital Gain.
Conventional wisdom is that only land increases in value and buildings decrease in value over time. However, my experience tells me that a well-designed, high quality new house can substantially increase a property’s value well above the appreciation of the land alone.
The example above of the new DDB house in Armadale Victoria showcases an increase in value by 15% per annum over 6 years then the property set a sales record by selling for $1.6 million above the vendor’s reserve price.
But the real kicker is that as a “principal place of residence” this capital gain is 100% tax free.
- Invest in great architecture.
Unlike most high value purchases (i.e., cars, furniture, sports equipment etc) that reduces in value over time; a beautifully executed new house increases in value as soon as it is finished. However, this is only bankable if you invest in excellent design.
Just like investing in great art, great architecture can be a fantastic long-term investment.
- Multiply your capital gain.
“Dual occupancy developments” are popular because they can multiply your capital gain. The per square meter building cost for two or three town houses is less than a single house. In addition, the overall property value is increased by sub-dividing the land.
This development process can take 2 or 3 years and is quite complex and not recommended for your first building project. Below is a link to my article on Dual occupancy developments.
“When the winds of change blow, some people build walls and others build windmills.” Chinese proverb
Thanks for reading,
Stay safe and dream of what could be?
David
