Everyone loves a brand new home, and that also includes both property investors and tenants.
Traditionally Kiwis have tended to think that a rental property should be an older and cheap house, but there are a lot of reasons to now think that an investment property should be a new build. New builds have a number of advantages and when you buy from ‘Built for Me’ you get some additional benefits that are exclusive to them.
Let’s start by considering the advantages with a brand new investment property.
Key Advantages With Brand New Investment Property
When you buy an investment property you want to know that you have a quality and low maintenance asset (the house) that is appealing to tenants and of course where the numbers work best.
Consider these points:
You might want to consider some of these benefits of buying new.
- Healthy Home Standards – these were introduced for rental properties in New Zealand on 1 July 2019. The five standards set out specific and minimum standards for heating, insulation, ventilation, moisture ingress and drainage, and draught stopping in rental properties. It can be expensive to upgrade a house to ensure that it complied with the healthy home standards, but a brand new house will comply and if you get a new build with a Homestar rating of a six guarantees a home that’s warmer, drier and healthier than a similar one just built to code.
- Low Maintenance – older homes can cost a lot to maintain whereby new builds should give you years with little or no maintenance costs. Many new builds come with a 10-year warranty so that ensures that your costs are controlled over at least the first years of ownership.
- Tenants Love New Homes Too – as an investor you want to ensure that your property attracts good tenants who are willing to pay a premium price (higher rent) and is easy to rent too. Everyone loves a well presented and new home, and that includes the tenants.
- Lower Deposits – if you are starting out as a property investor then you may be limited by what deposit you have available. If you buy an existing house then you will require a 30% deposit; whereas when you buy a brand new property you will only need a 20% deposit or when you buy from ‘Built for Me’ the unique financing option means you can get away with just 10% deposit.
- Interest Rates – everyone likes to get a low interest rate from the bank and mortgage advisers push hard to make sure that you get competitive rates too. When you buy from ‘Built for Me’ the unique financing option means you can get a Pro Fund Me mortgage for 10% of the purchase price for a low 1% and that’s fixed for 30-years.
The Pro Fund Me Difference
This is huge and worth considering!
For this example I will use a new build that ‘Built for Me’ have available in Mt Roskill, Auckland. This is a 4-bedroom home with 2 bathrooms and a garage and is available for $1,050,000 with expected rental of $880 – $910 per week.
If you buy a typical new build investment property then you will need a 20% deposit and therefore will have a mortgage for 80% from a bank. At the moment (November 2024) you might get your mortgage at 5.59% and so you could have a mortgage of $840,000 and the interest would cost you approx $900 per week so using the example the rents will almost cover the interest cost.
If you were to buy this ‘Built for Me’ option and use the Pro Fund Me mortgage for 10% of the purchase price then you could still use your 20% deposit and finance with Pro Fund Me for $105,000 (10%) and therefore just $735,000 (70%) from the bank and therefore your overall interest rate drops to approx 5.02% and that means your interest costs drops to about $810 per week. That’s a huge improvement for your cashflow and potentially means you will be making money from day one.
But, using the Pro Fund Me mortgage for 10% of the purchase price means you could just use a 10% deposit. That would allow you to buy a better house with the deposit that you might have, or to buy more than one property – in this case you could buy two.
Let’s Talk About This
If you are wanting to get started with an investment property then a brand new investment property is a really good option, but you would want to know more.
We typically like to discuss the principals of property investment, do an assessment on the affordability and then arrange the new build finance so you are ready to buy. This ‘Built for Me’ option is an attractive option due to the quality of build and the Pro Fund Me mortgage for 10% of the purchase price brings down the financing cost for you which does make the finances work better.