Is it possible to build a rental home that makes a profit.

SYDNEY 14 January 2012. Investing in property to rent out is often about negative gearing to save paying tax or to reduce tax.
Is it possible to buy land and build a house that when rented out at commercial rates, brings in more than the cost of a mortgage?
Owning a house or two to make money from the rent income used to make economic sense. Property often gained in value while earning cash and tax deductions. When the cost of land and a building to put on it, went to heights that did not match income, owning a rental property was only feasible if the losses between rent income and the cost of the mortgage were a tax loss that could be offset against income from other sources like salary or wages. Many people chose not to take the risk and as a result there is a shortage of rental homes in Australian capital cities.
For high income earners, negative gearing on investment property made sense. To cash in a tax schemes, a new industry developed as loan sharks and "investment advisers" held seminars to convince "Mums & Dads" that buying a new brick and tile home in the suburbs was a great idea and would fund retirement wealth. Success depended on property values going up ( which they did for a while ) interest rates staying low ( which they did for a while ) and investors having a job ( which became harder ). People lost money or the investment and the property touts disappeared.
From a business person's point of view, it is economic insanity to spend $400,000.00 on a house or house and land package that only brings in $400.00 per week or $20,800.00 per year when the cost of a $300,000.00 mortgage ( assuming that the person had 25% equity ) would be around $26,100.00 for the year. This would create a theoretical loss of $5,300.00 for the first year. If the property is in a good area, coinciding with an upward cycle in property values, it might make sense but it is a contrived risk.
There are literally 1000's of newish brick and tile homes for sale in new areas created from what were fringe city farms. They cannot be sold at asking prices and their "value" is determined by the price that the first person to bail out at a bargain price establishes as a benchmark for that street. The developers of those properties and the mortgage holders are facing severe losses. Get in the car and tour new outer suburbs around Sydney, Brisbane and Melbourne to see the losses waiting to happen in the form of new streets made up of spec homes that cannot be sold. They were built at the wrong time, with expensive materials put together by expensive labour in a time when banks cut back on marginal lending. Which is now !
It is possible to beat the contrived market conditions and build a rental property that actually makes more than a mortgage repayment. People or businesses with cash can get a good real return not just a negative gearing saving.
Astute property investors look to regional Australia where land is cheap and rental demand high. An example is on our real estate for sale website www.realestategold.com.au
A block of land at Kempsey -" 7 FORREST PLACE (582M2), ideal vacant building blocks in West Kempsey await your home plans. Near level ground, kerb & gutter, power, telephone, sewerage & water available. Quality brick home area. $32,000 ! Yes. That is the price. ( For sale at time of writing )
The land at Kempsey is typical of vacant development sites all around Australia. The next step is building a house at a sensible price". Local builders and project home businesses offer brick and tile homes at very high prices that often make a rental property investment nonviable. Some project home builders will not even give you price and do not publish prices. A high price and a long interval between concept and completion makes it very hard to interest a property investor in creating a new rental property.
A new home building product that is cheaper to buy, quick to build with, energy efficient and attractive, known as Koto is available for creating investment property. Koto Corp and Kaine Telford invented a building system that is now available in Australia. Made in Asia, the building products are distributed here in Australia by www.Kotosales.com.
A house can be built in weeks not months and will cost less per square metre than a brick and tile project home. KotoSales.com will project manage rental property for their clients providing support and a referral to licensed trades people who will build the property with a normal insured building contract appropriate for each State or Territory. KotoSales.com will project manage any building project in all parts of Australia.
For property investors, using new technology and seeking rental property sites in regional Australia can be a sound rental property investment strategy.
About KotoSales.com
KotoSales.com is an Australian business that is an authorised distributor of Koto Corp building systems. KotoSales.com is a building project manager providing investors with property development services. 
Contact KotoSales.com on 0400 530 002 or 02 6674 4180 or info@kotosales.com
Source http://www.international.to