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Residential Property Development: The Benefits

With rates low, prices falling and the lure of various first home owners grant, getting into the property market now may offer some of the best chances of making money.

The argument has always been that to create wealth in the property market you need to buy well. Once you do that you should always be ahead of the game.

But there is a better way …..

Just like any other investment, residential property development too involves a degree of risk. But when you are developing a residential property you can fully calculate and analyse the amount of risk involved based on certain criteria. These include the features of the property and the prevailing economic climate.

People will always need accommodation , and as a result you can be assured that there will always be demand for residential property. However, getting involved in residential property development involves various risk factors and the benefits can also be slightly curtailed as a result of these. However, here’s a look at the benefits of residential property development.

Manufactured Equity

Manufactured Equity means the difference between the cost of land and the cost of building your project.. In other words, say your land and building costs were around $500,000 and at completion, the bank evaluates the same at $750,000. This gives you Manufactured Equity of $250,000. The ‘instant’ equity property development delivers is far better than buying a property at value and waiting years for capital growth to happen! Personally I am unsure as to why anyone would buy ‘off-the-plan’ or at full value, when you can acquire at a developer cost via property development.

Malyshka helps people with Feasibility Studies, planning and execution to make sure the development project returns the maximum Manufactured Equity possible.

Tax Incentives

During the project, the developer is able to claim back GST for components of the project, the developer can use the “Margin Scheme” to reduce tax payable as well. On completion of the project the Developer can also have access to depreciation costs of the building. The depreciation value of a building is determined by the life of the building and its cost. This value can be legally deducted in the form of expenses. A developer will get this facility from all his projects and can considerably reduce your annual tax.

One Comment

  1. Great article. It is surprising how many new developers do not consider the tax implications of undertaking a property development.

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