Is purchasing Off The Plan for you?

Buying off the plan means you are purchasing a property before construction is completed. When you enter into a contract to buy off the plan you pay a deposit to secure the property, while the balance of the purchase price is payable on completion of the building. This comes with many advantages for investors but also some risks.

What could be an advantage is that you can secure property at today’s price, yet often not have to settle for up to 18 months or in some cases even longer. What this means is that while you’ll pay a 10% deposit when the contract is signed, you don’t have to pay the balance of the money until the property is complete. As a result the property may increase in value before it is even finished, producing capital gains prior to settlement. However as it is impossible to predict the future market it may be a disadvantage as the opposite could happen. Starting you off with a capital loss.

The time between purchasing and moving in can often take longer than a year. This should provide ample time to sell your current place and make sure everything is in order. It also gives you the luxury of shopping around for a mortgage. Selecting the right loan can save you money and stress down the road. This period also provides the opportunity to build up your bank account so you have a substantial amount to reduce the mortgage. In saying this, make sure you have a secure monetary future as there is also the possibility that your income and financial situation may be adversely affected during this time. If you can’t settle you are unable to withdraw from the contract as there usually is no finance clause.

As off the plan investments are usually released in lots it is common to have a choice of the unit or apartment available. By getting in early you may be able to score one with a view or that has better natural light. In some cases there may be an opportunity to have input into the design and finishes of the property, which could save renovating or repainting at a later date. A big drawback is that the property can be difficult to assess without physically observing it. Your expectations and reality may be different as you cannot be sure about what the final quality will be.

Along with the risk that completion could take longer than planned, be aware that the contract may state that the sale price may increase due to a rise in building costs. A worse, but rarer, outcome is that the developer could go into liquidation before the project is completed. If they do you may not be able to recover the deposit and completely derail your strategy.

Off the plan can be very profitable and save you a lot of money. However there are risks involved that you need to be aware of. Do your research to ensure the developer and builders are reputable with a track record of delivering quality buildings, which are as specified, to help avoid making a bad investment.

To talk more about off the plan or need finance please do not hesitate to contact our friendly team on (08) 9289 7777.