Experts have warned investors could lose tens of thousands of dollars by rushing to buy newly-built homes in response to federal budget changes.
Investors hoping to negatively gear newly-bought rental properties will be restricted to new home builds as of July 2027, in a bid to free up ready-made homes for owner-occupiers.
But property investment company Access Wealth has found several clients rushing into the market have lost more money than they planned to, simply by not doing their research.
Experts have warned investors could be tricked out of tens of thousands of dollars by rushing to by new home builds in the wake of federal budget changes.
Access Wealth managing director Dory Senior said many novice investors would rush to buy property without understanding the hidden costs, or without consulting with a financial adviser about their goals.
“Are you paying off a home, setting up retirement, taking care of your kids?” he said.
“[Invest] in a way that’s still gonna fit your current circumstances.”
Access Wealth managing director Dory Senior said it was important for investors to know what they were saving for when purchasing a rental property.
Hidden costs investors often miss include builder insurance, which Mr Senior said could significantly delay the building of a home.
“Many builders will have a low amount of coverage,” he said.
“You might be sitting there, waiting for six to 12 months while they work through their back catalogue of clients already in their pipeline, because they don’t have enough insurance coverage to build your property at the same time.”
Builder shortages and low builder insurance coverage can cause long wait times that buyers may not expect.
Other investors would not buy new homes on a full-turnkey contract, meaning the property’s final build could miss key features of a typical home.
“We’ve seen people handed a property with no driveway, no landscaping, or no blinds because they didn’t know what to look for,” Mr Senior said.
Meanwhile, buyers who purchase new builds without a fixed-price contract can lose up to $50,000 on unexpected expenses.
“They’ll get sucked in with a builder who has no budget in the contract for on-site works,” Mr Senior said.
New builds without a fixed-price contract could have surprise expenses of up to $50,000 thanks to surprises during construction. Picture: Jake Nowakowski
The advice comes shortly after the liquidation of leading buyers agency Dashdot. The company went under in May, after failing to provide $10.6 million in prepaid services or refunds to more than 700 of their clients.
“It sounded like they got more interested in signing people up to the service rather than delivering,” Mr Senior said. “There were nowhere near enough resources … to actually find the properties for those clients.”
Mr Senior said when consulting with a company to help find the right property, ask them to provide “confidence you can actually deliver on the service you provide within a realistic time frame”.
Buyers agency Dashdot failed to provide 10.6m in services and refunds to clients, which Mr Senior said should encourage buyers to ask for time frames when buying property.
Investment firm Infinity Group typically advises investors to purchase new builds, instead of jumping into the market with existing property.
Finance strategist Rachael Howlett said new investors would struggle to enter the market as easily as old investors thanks to the new federal budget’s limitations.
“My advice to those younger investors would be, you’ve got to look into those numbers a lot more closely,” she said.
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