Building to Sell

renovating for profit. This strategy is extremely similar to renovating with the aim of selling for a profit, and should be approached in much the same way - by making sure you will spend less on building a house than you will get if you sell it.

Unless you have a lot of cash to spare, the best idea is to build a house for yourself and your family to live in, stay in it for a couple of years to get the garden established, and then do it again. Unless you are building and selling with a fast turnaround for profit, each time you sell you won't incur capital gains tax.

Repeating this even two or three times can be enough to completely pay your house off, so this strategy can be very effective at getting you into a brand new, mortgage free house on a low income.

One of the downsides to this strategy is that you can't just sell your old house and move straight into a new house unless you have a very large deposit or the income to afford to do so. Building a new house takes time, and unless you can find a bank that will waive your loan payments during the building period, you will have to pay two mortgages while the new house is being built. On a low income this will be near impossible. Fortunately some banks do offer this facility, so this technique can be surprisingly attainable.

The other main downside is the same as serially renovating, in that you will have to move every 2-3 years, which can be very disruptive if you have children.

A slight variation on this technique is to alternate between a new build and a house that needs renovation, or simply rent during the construction period until you have built up the funds to be able to make a large enough downpayment on the next house that construction finance is easy to get.

The most ideal combination of renovation and building is to buy an older house on a large block that can be subdivided and a new house built on the subdivided block, live in the old house until the build is complete, and then sell the first house either renovated or as is. This technique also minimises the distance you have to move.

If you are on a very low income and think you can't afford to build, consider moving to a regional area and building a relocatable house. They have a very short build time and can be a lot cheaper than a brick house built on site. They have the added advantage of not necessarily needing progress payments, so it is more feasible to sell your current house and use the money from the sale to pay for the new house as soon as it is built.

Continue reading to the next technique for making money from property on a low income, which is simply to become a landlord.

Photo by Matias Romero / Flickr