As part of the fourth series of the Financial Freedom Friday videos, we discussed things to consider when buying land to build an investment property on. 

We've successfully assisted hundreds of clients across Australia to buy land and build on that land, and guided them every step of the way through the build process, from purchase to settlement.

In our exprience, we believe these are some of the things you should take into consideration when assessing what block to purchase.

Environmental Risks

The first thing to consider is the environmental risks of the area. Assess the potential impact of natural hazards such as floods and bushfires.  

Check the flood zones and the history of flooding in the area, and build above the 1 in 100-year flood level. Assess the potential risk of bushfires if the lot is near bushland or surrounded by trees and if there is a need to build with higher fire rating material.  

High-risk areas affected by these natural hazards can affect the bank's ability to finance the project. The overall build cost in making the property disaster-resilient will increase, as will the insurance premium paid to insure such a property. 

When investing, minimise the risk to help maximise the return.

Site Slope & Elevation 

The site slope and elevation can majorly affect the property's design, construction and liveability once built. So, it is essential to identify any challenges during the site inspection; otherwise, it could prove costly. 

For example, when it comes to the site slope, flat lots are cheaper to build on, easier to access and live on especially when it comes to fully utilising and enjoying your backyard. If the block is steep, which generally has a gradient exceeding 30 degrees, things such as customised design, levelling with retaining walls or construction can prove more costly. 

When it comes to site elevation, we usually recommend buying a lot that is on the higher side of the street, as water runoff from the road or higher land will naturally flow toward the lower-lying ground, and it can affect the soil movement and stability of the site. Not to mention dampness and providing ideal conditions for termites to thrive. To live a happy, full life, termites need water and they relish damp, moist ground.

Tree Risk & Maintenance

Trees on the lot provide numerous benefits, however, older and larger trees are also more likely to drop leaves and branches which means the need for costly gutter guard or a bi-annual maintenance of emptying the gutters of any debris. Invasive tree roots can also cause potential plumbing issues in the future by intervening with water and sewer pipes. 

Also, a major hazard from trees may occur during strong winds and storm events when trees can fall and injure people or damage property.  

If the lot has got substantial tree or vegetation coverage, it is best to deal with the arborist and your builder to assess the risks and provide advice on how to manage it and build around it. They will also be able to take into account any local Council laws around tree removal and whether it is allowed on your property or not.

Block Orientation

Choosing the block with the right orientation enables you to design a house that will not only be more comfortable to live in but more energy efficient. 

For example, a block that allows you to build a home where the living and alfresco areas and the backyard are facing north, means you can utilise the sunlight at the right angles throughout the year and reduce the need for artificial light, cooling and heating.

But not every block will give you this opportunity, so you’ll have to rely on an experienced builder and architect to create an innovative design that will maximise the north sun.

Building the property to suit the tenant or future buyer will help boost the property's value, the rental yield and ensure it remains occupied.

Local Demographic

It’s important that the block will accommodate the lifestyle of the tenant moving in. Research the suburb so you can pick a suitable block to build a house that will be desired by the majority of the local demographic. For example, a family with children will want a backyard to run around in.  

Modern size blocks are getting smaller, so if this is the demographic that you’re targeting by building a 4 bedroom home, you might have to consider building a two-storey home to minimise the home’s footprint while increasing the size of your yard. This enables you to design a house that could have more bedrooms and bathrooms, and potentially a better outlook too. 

It might cost more to build but if it improves the livability for the tenant and potential buyer, it will help boost the property’s value, the rental yield and be easier to rent out and eventually sell.

Turnkey Contract

Another thing to consider when buying land to build an investment property is signing a fixed price full turnkey contract with the builder.

The term full turnkey contract means that once the property is complete, the tenant can turn the key and move in. It should include where required, a driveway, fencing, landscaping, washing line, post box, security screens, blinds, kitchen appliances and a dishwasher.

By signing this contract, you can avoid unexpected expenses and delays when building and disappointments upon completion. Plus, having one point of contact during the entire process is convenient and places accountability on the builder. 

It is one way to minimise risk and feel confident that the property will have everything you want for the tenant to move in as soon as possible, and therefore avoiding lengthy vacancy.

Noise & Congestion

Noise and congestion from the local traffic or amenity might deter some tenants or buyers in the future.

Look at the surrounding area to see how close the block of land is to major roads or highways, train lines, local schools, airports, sporting grounds and clubs. 

For example, proximity to schools can be very beneficial from a location perspective as it can be a short walk for children to get to school, but it can also cause road congestion and drop off at pick up time.

Or having a property in the vicinity of a highway or a train line can be quite noisy and very unappealing to some tenants and buyers.

It is a fine line between being close enough to amenity, transport and main roads, but not too close that it could potentially disrupt tenants’ lifestyle.

Edward Reavy from EKR Property is a qualified property investment advisor (QPIA) and build consultant, who can take you through the entire process from sourcing the land, the build design and build tender process, managing the build, to renting the property.

He can manage those time-consuming tasks such as the build progress payments, organising independent building inspectors to check for defects, arranging a tax depreciation schedule and sourcing the right property manager to manage the property on your behalf. Plus much more. 

Take the guesswork out of buying the land and the build process by getting in touch with Edward at 0404 784 864 or emailing info@ekrproperty.com.au