If you’re thinking of buying off plan but you’re still not sure, this article will help you make up your mind. We will discuss the advantages of buying off plan and we will answer the most common questions to help you decide whether or not you should do this!
One of the great advantages of buying off the plan is that a purchase price is agreed on before the building is complete and you’ll only need to offer a small deposit. In essence, this means that you could pay less than a property’s worth because property prices increase during the time it takes to build them.
Is Buying Off the Plan a Good Choice For Me?
Whether or not buying off the plan is a good choice will the depend on the purpose of your investment and the amount of risk you’re willing to take. It will also depend greatly on your financial situation.
The best thing you can do to determine if this is the right choice for you is to review the advantages and disadvantages of making a purchase off the plan before you sign anything. Take your time; that’s the best piece of advice anyone can give you!
The idea behind buying off plan is that you get in it today so you can settle on your property once it’s complete. During this time, the value may have increased and, if so, you might turn a small deposit into a substantial profit. All this while avoiding holding costs.
However, the opposite is also possible. By buying off plan you could end up paying more than the property is actually worth once building is complete. This depends entirely on whether property prices drop while the property is being built.
unitIs Buying Off the Plan a Good Idea?
Buying off the plan can be a good idea depending on the situation. There are times where projects will have extra costs that are not immediately apparent and these costs will have to be covered by the buyer.
Another possible issue is that inflated prices can be covered up by advertisement that promises you will be paying at today’s prices. This is possible because these projects usually are a few years into the future, so it’s something that can be taken advantage of.
Is Buying Off the Plan a Good Investment?
One of the golden rules of investment is that land appreciates and buildings depreciate. If you live by that, you must aim for the highest land to asset ratio you can so that you get as much valuable land under your building as possible.
However, developers may work in the opposite direction, so they may try to squeeze in as many buildings as possible. This means that your interests and those of your developer could in direct opposition.
There’s currently an oversupply of new units and apartments in capital cities, and this fact drives down the prices, which is a problem for investors who want their property value to increase once it’s complete. That’s something to keep in mind.
What Are the Tax Implications?
When you’re buying off the plan, you may well save some money on stamp duty because in some states there may be discounts on properties that are newly built. If a buyer signs on the dotted line before construction even begins, stamp duty may not apply to the finished property, and in some cases is only payable on the land value. Be sure to check with your local area to see what the implications are for your purchase.
What’s the Legal Process Like?
Once you’ve decided on the location and the development project, you will then likely sign a contract of sale so you can buy it. Before you sign, though, it’s vital that you seek legal advice from a contract and property law specialist to make sure the contract includes all the relevant terms for the exchange.
w.What If There’s an Issue?
When you’re buying off the plan, it’s normal that you expect the property to be in near perfect condition the day you move in. However, this may not always the case.
Before you sign on the dotted line, you must make sure you’re aware of the developer’s policy for maintenance. The majority of developers will write their maintenance period on the contract, which is commonly around 90 days.
What this means is that you have 90 days to make the developers aware of any issues and they have 90 days to solve it. However, you must know that there are cases where a feature that you may consider a defect can fall into the builder’s acceptable standard of workmanship.
Buying off the plan can be exciting, but there are many different factors that are out of your control, and the whole thing can turn into a headache. Factors such as the builder going bankrupt during the project, or become unable to meet their obligations, which could mean the project might not be finished. These sorts of setbacks are important to consider because you may lose an opportunity to invest elsewhere.
How Do I Pay If I Buy Off the Plan?
Some lenders can show reluctance when it comes to providing finance for purchases that are off the plan. This is because properties can be sold for more than they’re worth. In an unstable market, the property value can decrease between the moment you sign the contract to the moment the building is complete. That’s why you need to become fully familiar with your lender’s policy.
How Does Resale Work?
When a large development is complete, the usual thing is that some buyers may try to both cash in and sell at once. If your off the plan property is a unit, you need to keep in mind that if there’s an oversupply of apartments this can sometimes decrease the value of the property. So what you want is to make sure you consider ongoing costs when purchasing a property of this nature.
It doesn’t really matter what kind of property you’re buying, the general rule of thumb is to look for properties that are near local parks, schools, shops and airports. This will make the property a lot more appealing to renters and buyers down the track.
As you can see, buying off the plan is perfectly doable, all you need to do is make sure you understand the process to make a good investment.