It's exciting to be a property's first owner, it’s like buying a brand new car. When you're buying off the plan, you get to the select the floor plan and the finishing touches, but along with the endless opportunities come increased risks.
One of the most common problems is a blow-out in the time between putting down the 10 percent deposit and completion. The original 18 months to two years can easily stretch to three or four years.
This is a problem in Sydney, rising prices have enticed some developers to rescind contracts with buyers once the "sunset" date has past and resell the apartments for higher prices. The NSW Government have put in new protections for purchases which means developers will need a buyer’s consent before they end a contract using a sunset clause but be sure to do your research here.
It can be hard to figure out if a place is just right for you when it is nothing more than a blueprint, council plan or artist’s impression.
All you can really consider is whether or not the numbers stack up, how likely the developers are to deliver on their promises and whether the contract conditions are beneficial for your situation.
Research Is The Key… Do Your Homework
When buying off the plan for investment there are additional components to consider when you’ll undoubtedly want to see that first rent cheque come in.
Provided that the developers come good on their promises you’ll need to consider when your new investment property will be available for rent. Additionally, how many other potential investors are buying in the same complex which could create an influx of properties all available at the same time.
As Spring is in full swing there is a large number of new rental properties on the market and this is creating a lot of choice for renters. Be sure to discuss this and the best strategy to finding you the right tenant fast with your Real Estate agent.
You’ll also want to consider what tenants are looking for: air-conditioning, pet-friendly, modern quality kitchen with reliable appliances and low maintenance.
Choosing The Right Real Estate Agent
Often when purchasing off the plan a Real Estate agent, who either sold units within the complex or contributed to the development will have first access to, the all-important, keys.
There is no doubt that they will make you an attractive offer for the ongoing management of your new property but consider your options here when deciding if this is the right Real Estate agent for you or just potentially another number on their books.
If there is an influx of properties within the same new complex all available for rent, will you be their priority?
Consider a boutique agent who’ll put your needs first.
Benefits vs Risks
There’s no doubt that buying off-the-plan can have significant financial gains for a buyer. In Australia, buyers can enjoy tax depreciation benefits, government incentives and the, of course, a brand new property. There are additional benefits for first-home buyers too with exemptions and concessions of stamp duty.
There are however inherent risks with any ‘buy now, pay later’ deal – and that is that you may not get what you thought you paid for. The ambiguity of contract terms is a huge factor in disputes arising from off-the-plan agreements.
It is essential to have a comprehensive contract that clearly sets out exactly what you are buying – from the features, fixtures and fittings to the insurance, voting rights (if it’s a strata property), timeframes and dispute-resolution processes.
Remember to do your research and consider if this is the right investment for you and your family. For more reading see below.