Hi guys,
I know this topic has been covered before but none of the posts I can find really talk about the financial side of things. I just recently bought a block of land and I am currently building on it (slab has just been poured). I want to get a better understanding of the differences between new building and existing in respect to the following:
– The way banks view a new build vs existing ie is there any additional risk factors attached to either come application time?
– Effect on serviceability – do banks take into account the time to build when considering your serviceability given the no rental income throughout the build period and how is this calculated given that rental income will be generated once build is complete?
– Any other experiences or resources concerning new vs existing would also be greatly appreciated, although its an obvious topic I have found that there isn't much info on it other than quite broad statements.
Also when talking about existing people often tend to assume you are talking about older buildings and that opens up the 'maintenance' and 'depreciation' can of worms but what about existing new vs build new?
Thanks in advance, any help here would be great – I guess I will soon find out if I've made the right decision with my current IP but it would be good to know now in prep for my next one.
Cheers
Hi se7en
Answers to your questions fairly straight forward
1) No lenders lend against the security value so whether the property is 5 weeks old or 50 years old really has no bearing on the loan as long as the valuation report reads well and no additional factors noted.
2) Most lenders will take into account anticipated rent on the property even if the rent wont kick in until the property has been completed. The rent will be applied as standard rental income when calculating serviceability.
Sure it is nice to by new but lenders do not in the main factor Depreciation or Capital Allowance claims into the borrowing equation.
We find most of our clients want us to source them property based on an improved yield over the long term and understand that buying a quality second hand property can bring them potential capital growth as well as income in the meantime.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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