Building Tips on FM97.3

Soil Tests

One way builders can seem cheaper than other builders is to under quote the soil of your new home.  Soil is classified according to reactivity S (Slightly reactive, M (Moderately reactive), H (Highly reactive & E (Extremely Highly reactive).  The more reactive the soil is, the more money it will cost to build a slab.  Honest builders include an appropriate estimate for the slab based on the soil type.  Non-reputable builders do not, they quote on “S” class soil, then send a $10,000-$20,000 bill after you sign the contract for the “extra” work.

Services Allowances

When a builder wants to “look” cheap they might under quote the service connections and then charge you extra for sewer, water, power etc.  Check the allowance is sufficient and get a guarantee in writing before you sign a building contract.

Site Costs

This is as old as Noah, builders deliberately under quoting site costs in order to win a contract and then slug the home owner.  Given a contour survey and soil test any competent builder can accurately quote site costs.  Check to see if your contract includes earthworks sufficient to cut a house pad, retaining walls, piers through the fill and importing/removing excess soil.

Liquidated Damages

Standard building contract allow for the builder to pay a home owner $50 per day for every day late they are on a building a new home.  This can be negotiated, does $50.00 per day really cover rent and interest while you are building?

Prime Cost Allowance

To look cheap some builder use low PC allowance e.g. Tile @ $20/SQM.  The lower the limit, the lower your choice is before you have to pay extra.  Check your allowances are sufficient before you sign.

Giveaways (Don’t be fooled)

Some builders offer $40,000 giveaways.  If it seems too good to be true, it is!  All these builders do is over-price the items in the giveaway and deduct other items out of the quote to compensate for the remainder.  You may get a free front door upgrade (really worth $100 and not the advertised $1200) but the contract now excludes shelves in the robes.  By the time to you add the extra back to your contract, you generally end up at a higher final price.

High Pressure Tactics

If you feel pressured to sign contract, DON’T.  If you hear the line “that’s what all builder charge”, then RUN.  Different builders do charge differently because their costs are different.  Building should be a pleasure, not a worry.  DO NOT SIGN WAIVERS.  The government has safeguards in contracts to safeguard your rights.  All building contracts have a 7 day cooling off period where you can cancel without penalty that is unless you have signed a waiver.  Good builders don’t pressure their clients.  At Aushomes we allow you to take your contract away, read it, show it to your lawyer or accountant and take time before you sign.

Not all Contracts are the same

Owners should be wary of builders who use their own contract and not industry standard.  Both the QMBA and HIA publish standard domestic housing contracts to give you piece of mind.  The HIA contract is written in plain English and very easy to understand.  Remember to read the notes on the plan, some sneaky builders will put on plan “not included in contract” or “by owner” when this was not the intention.

Master Builder

Did you know that to call yourself a Master Builder all you need to do is join an association?  There are no extra qualifications or experience required.  Just pay an annual fee and any builder can call himself a Master Builder.  The MBA is an employer association.

Investment Homes

Ever wanted an investment home?  You are probably paying 25-30% tax.  Well done correctly, you can use that tax money plus rent from a tenant + a small top-up (e.g. $100/wk) and pay off an investment home in as little as 15 years.  Imagine owning an extra $400,000 property when you retire earning you rent for only 15 years x 52 weeks x $100 = $78,000.   Forget capital growth or fancy inflated promised returns.  You doesn’t want an $400,000 home for only $78,000.  Call us to discuss with our new home specialists.  This is not new and has been a strategy of wealth Australians for years, now you can benefit too.

Write of an investment home on your tax

Did you know that you can claim a 2 1/2% tax write-off on the construction of a new investment home every year?  That’s right, the tax office allows for a 2 1/2% capital allowance write-down of every brand new investment home.  This means that over the next 40 years the entire construction price of your new investment home will be fully tax deductable.

Beware of in-house finance

Many builders offer in-house finance arrangements.  This can cause a large conflict of interest in the true value of your home.  Often the in-house finance is not the best interest rate available.  Many of these arrangements have the finance companies paying thousands of commissions to the building company.  If you end up paying only 0.25% more than you should over 25 years on a typical $400,000 loan than you could end up paying an extra $17,334 for your house.  You could have had a new car for that sort of money!

 

 

 

 

If you want to know more about AusHomes or investing in a new home for your future, call us today on 1300 MYHOME.