Buying a townhouse or apartment off the plan is a popular way to enter the property market, with many benefits such as government grants, the ability to customise, and more time to save.
These are seven factors to keep in mind when looking to buy a property off the plan.
1. Be ready to commit
Buyers are only expected to put down a 10% deposit to secure their future property, but it is best practice to clear your debt in order to increase the amount you are pre-approved to lend from your bank.
Pay off debt, spend extra time saving, and research the properties available in the area you wish to buy. Some lenders also have restrictions on property sizes, so ensure this is clear from the start.
Work to have your 10% deposit saved, as well as enough to cover stamp duty, legal fees, property management and borrowing costs.
2. Do your research
Don’t fall for the glossy kitchen benches and sparkling bathrooms, take time to investigate the area in regards to population growth, property prices, and future commercial or residential developments to determine if the suburb is a strong area to invest your money.
Make sure the property will appeal to the majority of buyers in case you wish to sell or rent the property in the near future, and understand who will be buying the properties around yours. The agent should be able to give you a strong understanding of the demographic information and buyer vs investor ratio.
3. Research the developer
The ‘who’ of the development is just as important as the where and what. Once you have a chosen development, start looking into the developer such as their portfolio, their management team, who is leading construction, and their reputation.
Also, ask the agent if they have made their pre-sales target and if they are on schedule for construction and delivery.
4. Understand what you are getting
All developments will have a selection of floorplans, however what you see at the display is not always included in the purchase price. Ask the agent which fixtures and fittings are a part of the purchase price, and be sure they are clear what costs will be extra upon competition of construction. You will also need to understand how much future body corporate or property management fees will be.
Also be sure you understand the important dates such as start and end of construction, when you can move in, and the date of your sunset clause.
5. Be realistic in your expectations
It is important to understand the construction and delivery schedule is based on a best-case scenario, and delays are to be expected. The end product will also be different to the display home/apartment, so it is important to have an experienced lawyer to refer to with your contract and agreements, and help you understand the what you are entitled to, and expected to pay for.
6. Be prepared for the worst
While delays are to be expected, there is also the possibility the development might not proceed or settlement will be delayed. This is where it is essential to know your sunset clause dates and keep up to date with news from the developer. There is always time to step out of the agreement, and your solicitor can help you navigate the process.
Another worst-case scenario is that you could end up paying too much, should the market weaken in the time you paid your deposit and the development is completed, or the property was overvalued from the starting point.
Taking your time to do research and arm yourself with the facts will protect you against most worst-case scenarios, and also help highlight the stronger developments on the market.
7. But know the benefits
As in all property markets there is window for the worst case, however, buying off the plan offers a wealth of benefits with many lenders looking positively on these types of developments.
In most cases, buying off the plan can help you find a great deal and save money, especially with most states offering stamp duty savings or discounts. With the end delivery date of the development often years ahead, you have more time to save and deliver another lump sum before taking out and servicing your home loan.
Once you have signed the contract and paid your deposit, you have a new property to look forward to and serve as inspiration to save more and borrow less – again offering you savings across the lifetime of the loan.
