What to look for when buying off the plan
Posted on 2 May 2017
It can be hard to part with your hard-earned cash and invest in a new home off-the-plan when all you can see is the plan, design or artist’s impression.
If you’re a first-time buyer the process can seem a bit daunting at first, but there’s also loads of appeal.
- Growth potential: The best prices are usually offered to purchasers who are prepared to buy-in early, so you can lock in a price today for tomorrow’s equity.
- Buy now, pay later: You can secure a high-value asset on a small deposit (often 10%) and not have to pay the balance until completion – giving you time to organise finances or sell an existing home and avoid bridging loans.
- Choice: Sometimes you can choose the location of the apartment and customise it with your choice of floor plan and selection of finishes.
- New for you: You can enjoy being the first to relax on the lounge, brew a coffee in the kitchen or entertain friends.
- Tax breaks and incentives: If you buy as an investor you may be able to claim depreciation, fixtures and fittings. There are also stamp duty concessions in some states and territories.
- Guarantees: For new builds you’ll get a builders’ guarantee where structural or interior building faults that occur within the first seven years must be repaired by the builder.
Like any investment, buying off-the-plan does have some risks involved and knowing those up front can help you make an informed decision.
The risks – and how to manage them
- Timeframes: Make sure you review the contract in detail so you understand timeframes and the triggers that will start or stop development (often when a specified percentage of the apartment building is sold).
- Finance: Consider how potential market fluctuations or interest rate changes, might affect your financial situation and, or loan arrangements between the time you make an offer and when settlement will occur.
- Inclusions: Make sure you have a comprehensive list of inclusions, including specified fixtures and fittings so that you know you are happy with style and quality that will be in your new home.
- Size: It is worth measuring out the size of rooms and outdoor spaces and comparing them to your existing home or a display home to make sure you are happy with the size and scale of the property.
- Contract details: Have a solicitor or conveyancer review the contract before signing on the dotted line. Always read the fine print and consider costs and conditions like break penalties, developer responsibilities, developer’s rights to make changes to finishes and materials, insurance, financing, stamp duty, sale options, any rental guarantees, strata or vendor-registered bylaws, strata fees/levies, defects, dispute resolution processes.
Most importantly, always choose a reputable, quality builder or developer. Look for one who has been around for a long time and has a great track record so you know their word is their bond and they’ll see the project through.
Choose wisely and that stunning plan and artist’s impression can turn into your reality!