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Property Ventures Extol the Benefits of New Builds

Friday 23 June 2017, 3:46PM

By Beckie Wright

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The second part of Property Ventures’ article on the benefits of buying off the plan or new builds, looks at the capital growth that can be achieved. With just a small deposit you get maximum growth from the whole purchase price while the property is being built. This is most effective in a growing market. Caution is to be taken in a flat market.

Time can be a great thing because it can give you choices. By the time your new build is ready, you may have made some equity. This may mean you don't require as much for the deposit to pay at settlement, or you can revalue after settlement and use this for another property or take the gains back out of the property. It could also allow you to trade the property before or at settlement, which means you will have profited from just a minimal deposit. Of course you would normally have to pay tax on any of this profit.

Then there is the matter of depreciation. Depreciation on chattels is still very much a good thing for investors. An investor can claim this as an expense and it can be worth thousands of dollars in the early years, especially when everything is new, and/or you purchase furniture with the build. Similarly, a new build obviously means fewer maintenance expenses for many years, resulting in more cash flow.

Property Ventures’ Mark Honeybone has this tip for purchasers of new builds. “Maximise the early years of depreciation and savings on maintenance, and pay this against the principal. Don't squander this money, pay it against the principal meaning accelerated results in later years. This will give you choice, because less mortgage means less risk in your investment, less interest to pay, more lending capacity on your investments and better cash flow. You can also get much better lending conditions than normal LVR rules for investors.

For more information on new builds, please contact Mark at mark@propertyventures.co.nz. You can also visit http://www.propertyventures.co.nz/Newbuild-Listings to check out what is currently available.