For many property investors, house and land packages seem like a safe and easy option. It’s simple, you save stamp duty, and you get a brand new property, with good tax benefits. Unfortunately, it doesn’t always work like this. Fat marketing commissions, shonky builders, second-rate locations and high competition can lead to a very bad investment experience.
Problems with House and Land Packages
- Price. You’re paying more than you think. Inbuilt in the cost for land and the construction of the house, you’ll be paying the hefty commissions paid by the developers to those who are selling the property, which can be up to $80,000! Not only this, while the contract you signed might have indicated a definite price, but it might still change and go up depending on the soil of the land you bought. There’s going to be additional costs if the block you chose is sloping. Hidden costs can make you pay much more.
- Size and Quality. Most of house and land packages are small, of course you can opt for bigger blocks but these will be significantly more expensive. In order to cut some of the costs, developers will buy materials in bulk and hire builders who are willing to work at discounted rates. This can greatly affect the quality of your home or if things go wrong, there will be great delays in building your house.
- Location. Most of these house and land packages are situated well outside the city, leading to limited infrastructure and long commutes. There are chances that it might be located far from important establishments such as schools, hospitals, shopping centres and other public amenities.
- Market Value. Since they are in the outskirts, the main areas you can buy house and land packages will often have weak economic drivers and shortages of infrastructures. To add to this is the competition to your house of the of many other house and land packages being built nearby. This excess supply can greatly affect the property’s value and rental demand, and can leave you as the owner significantly in the lurch if you are forced to sell.
These problems are not the only drawbacks, there can be instances of the house not actually being built at all. No matter how simply they seem, house and land packages still carry an element of construction risk. You may buy the land and pay a builder’s deposit, but if the builder goes bankrupt, this can be lost completely, or your purchase significantly delayed.
House and Land packages can work in the right circumstances, but you need to be properly aware of the costs and risks to make an informed decision as an investor.