Buying off the plan is a great way to purchase property that offers promising returns without having to pay the entire amount straight away.
Off the plan purchasing is attractive to many people because you’re securing yourself a property in a specific development at a known price; it gives you time to plan ahead. Another reason people choose off the plan purchasing is because feel confident buying in a development where the builders are known and trusted for quality.
Just like any other investment scenario, there are pros and cons. Your purchase decision isn’t based on a finished product that you can see and touch. You’ll base your choice from blueprints, scale models and a scheduled list of finishes. You won’t be able to assess the layout, finishes or outlook of the property until sometime after you’ve commit to it. Even the value of the property can change; it may rise or fall before construction has been completed.
On the plus side, most developers only ask you to put down a 10% non-refundable deposit. Then you usually have to pay the remaining balance within 10 days of the entire project’s completion date, so you have extra time to save and cover the difference.
Sometimes progress payments are required throughout the construction process. This can work in your favour as you may have already taken steps to build equity in your property before you have even moved in or found tenants. It’s important to know that lenders will not fund these progress payments, so if you are seeking finance, you’ll need to provide additional security (e.g. another property) to borrow money for these payments.
It’s crucial that you conduct thorough research on the builder, suppliers and location of your property as there have been cases where buyers haven’t been given what they were promised. Living spaces can be incorrectly sized, finishes may change and some projects experience lengthy completion delays.
Checklist for purchasing off the plan
- Investigate past developments built by the developers you have chosen
- Ensure you have clear documentation detailing all aspects of your chosen property, including room dimensions, materials and finishes, and ask for a full list of pre-agreed finishes
- Secure information and understanding about recent and comparable sales and projected rental returns
- Apply for home loan pre-approval to ensure the purchase is within your means before you sign the contract and construction commences
- Seek assistance from a third party to help read and clarify all details of the building plans and purchase contract
- Contract completion for off the plan purchasing is not until the building has been finished and its strata plan is registered. Usually the buyer pays a deposit and the remaining balance is paid at the time of settlement, once the building has been completed
- Seek legal advice and review the conditions, benefits and restrictions provided in the terms of the contract before making payments and signing your documents. Consider penalties applied if you wish to withdraw from the contract. Other things worth investigating include; options to change finishes, options selecting appliances and items such as wall and floor tiles, visiting the site during construction, and knowing your rights in the event that the property loses value while being built.
If you are interested in off the plan purchasing then book into one of our free seminars to find out how our trusted partners conduct their research!
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