{"id":20776,"date":"2024-06-12T12:30:00","date_gmt":"2024-06-12T02:30:00","guid":{"rendered":"http:\/\/propertyupdate.com.au\/?p=20776"},"modified":"2024-06-11T10:23:03","modified_gmt":"2024-06-11T00:23:03","slug":"buying-off-the-plan","status":"publish","type":"post","link":"https:\/\/propertyupdate.com.au\/buying-off-the-plan\/","title":{"rendered":"Buying Off The Plan \u2013 What Every Property Investor Needs to Know"},"content":{"rendered":"

Are you considering buying an investment property off plan?<\/p>\n

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Tip: <\/span>Please think again and turn the other way!<\/p><\/div><\/div>\n

There are just too many risks involved in the off the plan sector of the property market.<\/p>\n

As property prices continue to climb<\/a> across the nation, reaching or surpassing their pandemic peaks while stock dwindles by the day, I can understand why some investors think it's a good idea to put a deposit down on an off-the-plan property to settle in a few years\u2019 time.<\/p>\n

They\u2019re hoping to turn a relatively small deposit into substantial equity, all while avoiding those nasty holding costs.<\/p>\n

Meanwhile, other investors are being tempted into buying off-the-plan properties, enticed by the advertising hype of stamp duty savings, depreciation allowances and so-called \u201ccheap\u201d prices.<\/p>\n

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Note: <\/span>While buying a property off the plan has rarely been a good investment strategy, this is the riskiest investment strategy in the current market and one to be avoided.<\/p><\/div><\/div>\n

How does buying off the plan really work?<\/span><\/h2>\n

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\nBuying an off-the-plan property means the buyer is purchasing a property before it has been completed, or even built, based on plans and specifications which are provided by the developer.<\/p>\n

It\u2019s something we commonly see for large apartment blocks, housing developments or villa complexes.<\/p>\n

The idea is that a buyer would put down a deposit on a property that will be built in the future, and those funds provide an element of security for lenders to the project, as banks won't advance development funding until a certain number of presales are made.<\/p>\n

Here\u2019s a breakdown of how it would work:<\/p>\n

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  1. Reserve a property:<\/strong> Once a buyer has chosen a property and is happy with the design plans, they would usually need to sign a reservation agreement and a (usually) advance a non refundable fee.<\/li>\n
  2. Pay a deposit:<\/strong> The buyer would then need to pay a deposit to secure the property, often around 10% of the purchase price.<\/li>\n
  3. Sign the contract:<\/strong> A buyer would then (after getting a legal review) sign a contract of sale which legally binds them to purchasing the property. There might be a cooling off period here too.<\/li>\n
  4. Stay informed about construction updates:<\/strong> As the construction progresses, developers usually provide regular updates, including details about timelines and any changes to dates or plans. There may be opportunities to inspect the property over this timeframe too.<\/li>\n
  5. Final inspection:<\/strong> Once construction has been completed, you\u2019ll need to do a pre-settlement inspection to make sure it matches the agreed plans.<\/li>\n
  6. Settlement:<\/strong> Like a usual property purchase, the next point is settlement, which is the final stage when the balance of the funds are paid and the property is transferred to your name.<\/li>\n
  7. Handover:<\/strong> This is when you\u2019ll receive the keys and can move into the property (or lease it out).<\/li>\n<\/ol>\n

    Benefits of investing in off-the-plan properties<\/span><\/h2>\n

    There are several reasons that buying an off plan property might seem to be beneficial versus buying an existing property, such as the following:<\/p>\n