Low entry price. Excellent long-term potential. Significant depreciation advantages.
Property investors can enjoy all three benefits by buying a house-and-land package, for just $400,000, in select pockets of north-west Tasmania that, strangely, most investors ignore. The locations to target include Launceston, Devonport, Burnie, Ulverstone, Wynyard and Smithton. Please note, though, that all those locations have certain no-go areas for investors, so you need to be very selective in where, specifically, you buy. Also, even good areas have bad properties, so you need to be very selective about which house-and-land package you buy.
If you don’t have the skill to identify those areas and properties, Buyer’s Agents Tasmania can help.
Strong growth in house prices and rents
Over the five years to 2021, median house prices and median house rents increased significantly in those locations:
- Launceston = prices 73%, rents 43%
- Devonport = prices 76%, rents 26%
- Burnie = prices 16%, rents 40% (note to Sam: 16% is not a typo)
- Ulverstone = prices 68%, rents 30%
- Wynyard = prices 73%, rents 37%
- Smithton = prices 73%, rents 29%
Those numbers are based on Real Estate Institute of Tasmania data, and refer to the individual suburbs not the cities/towns as a whole. Past performance is no guarantee of future performance. But history shows that property investors who bought quality properties in quality locations and held them for the long-term enjoyed impressive long-term returns.
The potential tax benefits of buying new house-and-land-packages
Buying established properties can be a very successful investment strategy. But there are two big advantages that come from buying new properties, like house-and-land packages:
- You have lower maintenance and running costs, because all the fixtures and fittings are new and modern
- You can enjoy depreciation benefits
Those depreciation benefits come in two forms (although please speak to a tax professional to make sure they apply to you):
First, you can write off the construction costs at a rate of 2.5% per year for 40 years. So if the property cost $200,000 to build, you could reduce your taxable income by $5,000 each year (as $5,000 is 2.5% of $200,000).
Second, you can also claim depreciation on the fixtures and fittings within the home, such as hot water systems, air conditioners and carpets. The depreciation period differs from item to item.
To maximise your deductions, it’s generally a good idea to invest in a property depreciation schedule. Please note this is general advice only, and that you should speak to a tax professional to see how depreciation might apply to your personal situation.
4 Things You MUST Know as a Property Investor
Remember, this article does not constitute financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.