Are House and Land Packages the Best Choice for Cashflow-Positive Rooming House Investors?

Introduction: The Attraction of House and Land Packages

House and land packages have long been promoted as an easy, accessible way to invest in property. They often catch the attention of investors seeking a low-stress pathway, particularly first-timers. Marketing for these packages promises a new home, builder warranties, and a set price. But are house and land packages truly the best option for investors seeking strong, positive cashflow—especially those interested in Rooming Houses?

Understanding House and Land Packages

A house and land package typically involves buying a block of land and a new build from a developer, often as a turnkey solution. While these packages can suit owner-occupiers or families seeking a brand-new home in a developing suburb, their suitability for investors—particularly those targeting high-yield strategies—deserves closer analysis.

House and land packages are often located in city outskirts or rapidly growing suburbs. The appeal lies in the convenience and newness, but this comes with several challenges for those seeking reliable, above-average cashflow.

Key Considerations for Investors

1. Rental Yields and Cashflow

The most important factor for Rooming House investors is positive cashflow. Traditional house and land packages often generate rental yields of around 3-4 per cent per annum. After covering mortgage payments, council rates, insurance, and maintenance, many investors find themselves in a negative cashflow situation.

Rooming Houses, by comparison, can offer much higher rental returns, often exceeding 8 per cent gross yield—sometimes even more depending on location, demand, and property configuration. This higher yield is achieved by renting out multiple rooms to separate tenants, maximising income from one asset.

2. Location and Tenant Demand

House and land packages are commonly built far from city centres, where land is affordable and available. However, Rooming House tenants typically seek proximity to employment hubs, universities, and public transport. Properties in fringe suburbs may struggle to attract Rooming House tenants or achieve premium room rents, making location a crucial factor.

3. Depreciation and Tax Benefits

New builds do offer some advantages, such as greater depreciation benefits on both the building and its fixtures. This can improve after-tax returns in the short term, but investors should remember that depreciation is not a direct cashflow benefit and does not offset negative gearing in the long run.

For Rooming House investors, while new builds can still deliver depreciation value, the key is ensuring the asset delivers positive cashflow from day one, rather than relying on tax offsets.

4. Growth Prospects and Resale Value

Many house and land packages are located in areas with large volumes of similar properties. When it comes time to sell, this can limit capital growth and make the property harder to sell due to competition. In contrast, well-located Rooming Houses are a unique asset class that can attract both investors and operators, especially as demand for affordable housing rises.

5. Customisation for Rooming Houses

Most house and land packages are designed for single families and may not easily convert into compliant Rooming Houses without substantial modifications. Investing in a property purpose-built (or easily adaptable) for Rooming House use saves time and money, and ensures compliance with local rooming regulations.

Why Rooming Houses Outperform Traditional House and Land Packages

For investors seeking strong, consistent cashflow, Rooming Houses stand out for several reasons:

• Superior Rental Yield: Renting by the room means you can achieve higher returns per square metre.

• Diversified Income: With multiple tenancies, vacancy risk is spread, reducing the impact of a single vacant room.

• Growing Demand: More Australians are seeking affordable, flexible accommodation options, creating sustained demand for Rooming Houses.

• Customisation: Properties can be purpose-built or renovated to maximise compliance and tenant appeal, further boosting returns.

• Government and Council Support: Many local governments support Rooming Houses as part of affordable housing strategies [source].

Potential Risks and What to Watch Out For

Any property investment comes with risks. With Rooming Houses, investors must be attentive to compliance, tenant selection, and ongoing management. Local council regulations can be complex, so expert guidance is essential. Additionally, not every suburb is suitable—careful research into tenant demand and rental rates is required.

House and land packages, while simple, may face risks of oversupply, limited capital growth, and lower yields, making them less appealing for those prioritising cashflow.

Conclusion: What Should Cashflow-Focused Investors Do?

While house and land packages have their place in the property market, they are not always the best fit for investors pursuing strong, positive cashflow—especially those interested in Rooming House strategies. The unique combination of high yields, diversified risk, and sustained demand makes Rooming Houses a compelling alternative.

If you are considering investing in Rooming Houses, the right guidance is essential to ensure your investment is compliant, well-located, and cashflow positive from the outset. At Jabel Property, we specialise in helping investors build and manage successful Rooming House portfolios across Melbourne. Our expertise in selecting the best locations, designing compliant assets, and maximising your cashflow can set you up for long-term success.

Ready to take the next step? Book a free discovery call with our team today and see how we can help you achieve your investment goals.