To build or to buy your investment property? That is the question.
- Deciding whether to build or buy an investment property depends on your budget and buffers, time horizon, and risk appetite.
- Building a property can allow you tailor the home to tenant demand and potentially create equity.
- Building comes with risks, including longer timeframes, costs and timelines blowing out.
- Buying a property is typically faster and more predictable.
Building a property can allow you to tailor the end product to the market and potentially create equity if the final valuation exceeds total costs. However, it also comes with added complexity, longer timeframes and greater risk if costs or timelines blow out.
Many would-be investors simply don't have the time required to research, calculate and oversee a construction project. If you do have the time, it's essential to understand the full cost implications before committing to a build.
Buying an established property, on the other hand, can be a far quicker and more straightforward process, allowing you to generate rental income sooner. While it may not offer the satisfaction of building something to your exact specifications, it can be a more predictable option for investors who prefer certainty and speed.
Savings.com.au's two cents
There's no universal answer to the question of whether you should buy or build an investment property. Building can suit investors who have the time, risk tolerance and financial buffer to manage a complex project, while buying established may appeal to those prioritising speed, certainty and location.
The right choice depends on your goals, budget, time horizon and appetite for risk - and it's worth seeking professional advice before committing to either path.
Pros of building an investment property
When you buy an existing home, there are almost always features you'd like to change or improve. Building from scratch allows you to start with a blank slate.
Build to meet market demand
You can tailor a property to suit tenant demand. Factors such as layout, number of bedrooms, storage, energy efficiency and materials can all influence rental appeal and long-term value.
Building also allows you to choose your builder. You can compare quotes, review previous work and assess reputations, which isn't possible when buying an established property.
Tax deductions and depreciation
Investment properties come with a range of tax deductions, and new builds have some additional considerations.
One of the key benefits is capital works deductions, which generally allow investors of eligible build-to-rent properties to claim 4% of construction costs each year (increased from standard 2.5%) for up to 25 years, provided the property meets Australian Tax Office (ATO) requirements.
Note that this incentive is subject to meeting specific criteria for BTR developments and may unlikely to apply to most individual mum-and-dad investors.
Depreciation rules can be complex, particularly during the construction phase, so it's important to speak with a qualified accountant or depreciation specialist to understand what you can and can't claim.
Learn more about claiming depreciation on investment property.
Building equity
If the completed property is valued higher than the total cost of land and construction, you may be able to access that equity sooner than if you had purchased an established dwelling. This could allow you to refinance, invest elsewhere or fund your next purchase.
That said, equity gains are never guaranteed. Cost overruns, market softening or overcapitalising on design features can all erode potential gains.
Use our Equity Calculator to get an estimate of the equity you have in your home.
Building may be cheaper than buying in some markets
One reason investors choose to build is that buying land and constructing a home can sometimes be cheaper than purchasing an established property in the same area - particularly in growth corridors or new estates.
However, building also requires a significant investment of time and energy. Managing a build alongside a full-time job or other commitments may not be realistic for everyone, and the value of your own time should be factored into the equation.
What does it cost to build?
According to the Urban Development Institute of Australia (UDIA), median lot prices vary significantly across capital cities and have risen notably in recent years. Land in well-established suburbs remains scarce and often commands a premium.
Additionally, build costs can differ substantially depending on location, design, materials and builder availability. When estimating total build costs, investors should also account for:
- Stamp duty on land (which varies by state and buyer type)
- Site preparation and infrastructure costs
- Delays caused by weather or material shortages
- Upgrades, variations and custom features
See also: How much it costs to build a home in Australia
Using rough estimates, the total cost of buying land and building a standard home in capital cities can still sit below the median value of established homes in some markets. However, these figures should always be treated as indicative only.
According to The Urban Development Institute of Australia's (UDIA) State of the Land 2025, the median cost of buying a lot of land across the capitals is in the table below:
Capital market | Median lot price (2024) |
Sydney | $667,000 |
Melbourne | $403,000 |
South East Queensland | $417,000 |
Adelaide | $307,000 |
Perth | $329,000 |
ACT | $652,000 |
Meanwhile, construction costs can vary significantly depending on location, design, materials and labour availability. The table below uses indicative construction cost ranges (based on Q4 2024 rates) published by Rider Levett Bucknall (RLB) for units 90-120 square metres.
City | Low range cost per square metre | High range cost per square metre |
Sydney | $5,300 | $6,700 |
Melbourne | $5,000 | $6,000 |
Brisbane | $4,500 | $6,500 |
Adelaide | $3,900 | $4,800 |
Perth | $3,900 | $4,800 |
Darwin | $3,550 | $4,350 |
Canberra | $4,300 | $6,000 |
These benchmarks are based on recent market conditions and provide a broad guide, rather than a fixed estimate of the cost of a specific project. RLB notes these ranges typically exclude GST, land, legal/professional fees, loose furniture/fittings, and site works/drainage (among other exclusions).
Cons of building an investment property
Limited location options
Land in established, high-demand areas is limited. Investors often face a choice between paying a premium for well-located land or building further from city centres where supply is greater.
Knock-down rebuilds are another option, but they introduce additional costs and complexities that need careful consideration.
Factors beyond your control
Building projects are subject to council approvals, zoning rules, height restrictions and environmental regulations. Nearby developments, such as new apartment blocks or commercial buildings, can also impact views, supply and future value.
In new estates, a high volume of similar properties coming online at once can increase competition among landlords, potentially affecting rental returns.
Costs and timelines can blow out
Any fans of The Block or Grand Designs are used to seeing budgets blown out of the water. But it doesn't just happen on TV.
Build timelines are estimates, not guarantees. Weather delays, labour shortages and material availability can all push projects well beyond their expected completion dates. Budget overruns are also common, particularly when variations are added or initial allowances prove unrealistic.
You will also be dealing with a long list of people during the process - architects, builders, electricians, plumbers, painters - all of whom play an important role, but all have their own schedules, commitments and costs that won't perfectly align with one another.
Delayed rental income
The longer your project takes to complete, the longer you are waiting to see a return on your investment. While your property is under construction, you will most likely be making loan repayments without any income from the property.
Many construction loans are interest-only until the build is completed, which can ease cash flow pressure. However, once construction is complete, repayments typically switch to principal and interest.
By contrast, buying an established property can allow you to earn rental income almost immediately - sometimes from day one if tenants are already in place.
Pros of buying an investment property
Here are some of the reasons buying an investment property may be the better option for you
You get what you pay for (usually)
With an established or a completed newly built property, you generally know what you're getting. Building inspections and pest reports can highlight potential issues upfront, allowing you to budget accordingly.
Additionally, buying an already constructed may also be the only way to enter tightly held suburbs with strong tenant demand and established infrastructure.
Location advantages
An already built home in an established neighbourhood with good schools, parks, cafes, restaurants, etc., won't be as hard to find as a vacant block in those suburbs.
Note, however, that vacant land in these areas is rare, and when it does appear, it typically comes at a premium.
Smaller deposit and simpler finance
Construction loans often require higher deposits and more complex approval processes. Buying an established or a completed newly built investment property can be simpler from a lending perspective, particularly for first-time investors.
Some investors also choose interest-only investment loans initially to help manage cash flow while covering other costs.
If you're leaning towards buying a property instead of building, below are some investment home loans with low interest rates currently available on the market.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.24% p.a. | 6.28% p.a. | $3,075 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
6.04% p.a. | 5.95% p.a. | $3,011 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
6.14% p.a. | 6.16% p.a. | $3,043 | Principal & Interest | Variable | $0 | $350 | 60% |
Faster process
Buying a property is usually far quicker than building. In some cases, you can sign a contract and have tenants in place within weeks. This means less time with the property sitting idle and no rental income being generated.
Cons of buying an investment property
Higher purchase price
In many capital cities, median property values remain higher than the estimated cost of buying land and building, particularly in established suburbs.
That said, purchase price alone shouldn't be the deciding factor. Ongoing maintenance costs, renovation needs and depreciation limitations can also affect long-term returns.
Tax incentives for building or buying newly built properties
Whether you’re building or buying (so long as it’s a new build) an investment property, you may still enjoy the benefits of negative gearing even after recent reforms.
From 1 July 2027, negative gearing for residential property investments will generally be limited to new builds. Existing property holdings are largely grandfathered under the current rules, but for future investments, the reforms may strengthen the case for building or buying a newly constructed home.