Hi all
I am looking at buying a block of land in an isolated, country town with a small population. The blocks of land are around $55,000, which to me represents good value.
I can’t really afford to buy a house and land, or even buy a block/build right now, so I am trying to start using stepping stones and buy just the block of land first, and then in the near future (1-2yrs time) then build a house on it, thus securing the land at todays prices, or selling the block for a profit or just holding onto it indefinitely etc.
Are there any lenders that would lend for a block of land like this? When I look at the majors, all their loans tend to be for building, or buying a house – not just land. What is the usual loan term for land, do lenders do 30 years term? I earn about 48,000 p.a.
If I got a loan for the land, how much deposit would I need? I have heard to buy a house in this particular place lenders will only do 70% LVR, would that mean I need 30% deposit for the land or are there any ways around that??
I don’t know if an investment loan is the right thing either, because in the future there is a possibility I would want to build a house as my PPOR on this block. If I built are there ways to roll two loans into one? I would assume I’d need to substantially increase my income and job security as well as save a large deposit to get a construction loan some time in the future. Being involved as an owner builder would also be a consideration in the future for this block.
I’m 23 yrs old so just trying to start somewhere because long term I believe the town will grow and become an exclusive premium area with big rises in land prices. I’m not eligible for any FHOG benefits.
Any reply is very much appreciated.
Loans for land are available up to 95% LVR depending on the location. So you may need as little as 5% deposit. Most lenders offer land loans but some have a requirement that you must start building within 12 months.
There is generally no difference in applying for a owner occupied loan v an investment loan. Same rate and conditions etc. Owner occupied loans mean you may have more rights if things go wrong – the UCCC.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Unless you have the ability to break the drought in many regional areas, land prices will and have remained stable over many years. The cost of buying an established house is often very little more than buying the land as very little investment has occurred for several years in many of these areas due to decreasing populations, loss of skills, loss of services (banks, schools, shops etc) and of course drought.
If you are after capital gains in the longer term, I would consider the much safer option of saving your money in an online bank account at least for the next few years until you are able to afford a reasonable deposit on a suitable block in the desired location.
Isolated towns do not have capital gains, land values are negligible and the time it takes to sell a block of land or house can be up to several years due to the lack of demand.
Regional towns are difficult, isolated towns are at the very least challenging and unless you intend to live there & do the work yourself very costly to build.
There are no tax advantages for buying a block of land. If you pay just a few extra bucks for something with a rentable house on it you will have a better chance of getting your loan because usually 80% of the rent is added to your income, for affordability.
The difference between what it earns and what it cost is deducted from your taxable income for tax purposes. even if it isn't rented. It only has to be available for rent.Knock it down when you feel like it and build your new house.
asabove
You can claim costs on a block of land if you intend to build an investment property on it – but it is hard to fund without any rent.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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