When it comes to property buying, there are many types and forms of real estate available. One popular type of property is the house and land package. So what is a house and land package and why is it so popular?
There are two types of house and land packages
- You buy your vacant land and later build your home with a construction loan.
- Buy the house completed on the developer’s land.
The second option is referred as a ‘full-turnkey’. Where you purchase a home fitted out with all the inclusions and set at a fixed price. This means your home is ready to move in. The house and land package includes site costs, permit, fencing, landscaping, clothesline, letter-box, driveway etc. It also comes with internal inclusions such as a fitted out kitchen, bathrooms, flooring, lighting and more.
Purchasing a house and land package with a single, fixed price for land and construction, full-turnkey properties eliminate any nasty surprises. It eliminates builders requesting additional money during construction due to under quoting their work. Know all the costs upfront and the expected time frame for the build will allow you to budget and plan your purchase. Having this fixed price with a full suite of inclusions is also favourably seen by the banks. If you are looking to finance your purchase this is the way to go!
Many people initially perceive the first option to be the more cost effective purchase but it most certainly is not. It is not unheard of to encounter site costs up to $50,000. Something like this could cripple your purchase. A full-turnkey is a safer and more transparent way of buying your dream home or investment property. This method is also you to move-in or rent out faster.
House and land packages can be published all over the internet, but you must look with caution. Many are not full-turnkey, many have limited inclusions and many may be pricing them incorrectly. You must also be confident that the builder is profitable, reputable and honest with what they will build. We often say at Crest Property Investments that quality is better than quantity. Price has great relevance, however there are certain inclusions and features that will save you thousands in the future if bought properly in the first place.
Choosing your own house and land package can be a lot of fun
Things to consider when buying a House and Land Package
When looking to buy your next house and land package, there are many other things you should consider other than the property itself.
- Take note of the infrastructure in the area. Some new land estates look very appealing at face value, but as they are often outer suburban areas, there can be limited public transport. There may be proposed infrastructure including a train station or extended roads, but these may take time before they unfold. You need to assess your lifestyle in advance before deciding where to buy.
- Some land estates are better than others. If you have your heart set on a suburb, perhaps talking to a property adviser will help ascertain which estate is right for you.
- Land titling can vary. When buying a house and land package, delays can be experienced. It’s all about waiting for the land to title. If the land estate is behind schedule, you may have to wait longer before your house is build. Take note of your own time frames to ensure it doesn’t breach your patience.
- When looking at buying a house and land package (as per the first option), you’ll need to consider if any extra costs will be applied. If the ground has clay or stone, it may increase your costs dramatically. If the block is not flat, this will also cause additional costs.
- For investors buying house and land packages, take note that you will be without a tenant while the house is built. Therefore you’ll be responsible for paying your loan during that time. In our experiences we see homes build within 3-4 months, but they can take up to 6 months if there are issues such as bad weather or poor access to the site. Buying a full-turn key is preferable among investors as they reduce this cost.
- Some land estates can be quite large. Some suburbs may also have multiple land estates on the market at one time. Consider if an oversupply will affect you as the land around you is built up. For investors you want to make sure you property is not untenanted for long nor is it leased under market due to high competition. Most new land estates release the land in stages, which reduces how many are on the market at one time.
- When considering the construction, you’ll need building plans and to obtain an approval from council. Fortunately a full-turnkey includes these costs and services within the building contract. Choosing option 1, you’ll need to work through these obligations autonomously.
How much is needed to buy a house and land package?
When buying a property, in most cases a 10% deposit is required. When buying a House and Land Package, you usually need a 10% land deposit up-front and a 5% build deposit for the construction of the house. With a full-turnkey house and land package, you may only need as little as a 5% deposit.
An excellent incentive why house and land packages are so popular is the stamp duty implications. Stamp duty only applies on the land value, excluding the house value. When buying an established house and land you are liable to pay stamp duty on the entire value. The stamp duty saving can comfortably surpass $10,000-$20,000.
Another wonderful benefit to building a brand new house is the maintenance costs. An established home require regular maintenance compared to a brand new home which may have very little attention for a number of years. With fixed priced full-turnkey house and land packages there are generally no hidden costs and a builders warranty will provide plenty of peace of mind.
Buying a house and land package may not be for everyone, but there are many benefits that please investors.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more please contact us. We welcome the opportunity to assist you.
May 2019
