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Buying a House, Property or Land? Property Types Explained

Buying a House, Property or Land? Property Types Explained
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If you are looking to become a property investor, it’s important to consider the type of property you are investing in carefully (before you invest!). Some types of property are great for beginner investors and others are a little more intricate an investment. To help you get started, here are the top three most common types of Australian property explained.

What Does Property Type Mean?

Property listings have different building types or fields that are used to describe what kind of property is for sale. Also, the property type is often referred to by people when describing it to others. Most importantly, the type of property you are wanting to purchase is essential to a lender when determining your LVR.

It’s important to know the difference, because each type of property has its own benefits and negatives. Of the most common three types of property listed below, some have better tax benefits, have lower or higher loan borrowing limits, have more conditions on sale, or certain legislation that is important for a potential purchaser to know.

Australia’s Top 3 Types of Property

1. Vacant Land

This is just as its name states: a piece of land that is vacant. Quite simply, any land that doesn’t have a building located on it is considered ‘vacant land’.

There is residential vacant land, which can mean land that has been carved up by a developer with the potential for a residential property to be built on to it. This is usually done in high-demand areas.

Rural vacant land is a block of rural land that has been or is intended to be rezoned for residential use. A strategy usually done by advanced investors as it is considered a high-risk property purchase.

Commercial vacant land, is empty land zoned for commercial use. When a property or land is ‘zoned’, this means that that exact type of property must be built onto that land. So, if it is zoned commercially, then a building for business must be built on that vacant land.

2. Residential Properties

One of the most popular property types for investors, a residential property is any building that is used or is suitable for use as a dwelling. It can be in the process of being built or long established, so long as it’s use is to house people.

There are many different types of residential buildings, including: homes, units, townhouses, duplexes, etc. Depending upon the circumstances of the investor as to the type of residential property they wish to purchase, this type of property is generally a great choice for first time or beginner investors. 

3. Commercial Properties

This refers to any property that is used for business activities, or in other words a building that houses business(es). In some instances, it can also refer to land that is intended to generate profit, or a larger residential rental property.

When a building is designated as a commercial property, it majorly affects the financing of the building, the tax associated with it and the type of laws that apply to it.

Many residential property investors looking to diversify their investment portfolio will seek out commercial property for potential investment opportunities.

Why does the property type matter?

It is important that you consider the type of property carefully before investing. Each property type will have its own set of legislation and one type will be a better choice of investment for you and your needs. If you are beginner property investor, most would avoid purchasing vacant land and stick to residential property.

If you are a medium to advanced investor, the different types of property that you invest in will play a huge role in the diversification of your investment portfolio. It’s important not to purchase a bunch of just one type of property, you want to spread your investments across different types in order to minimise your risk.

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