Home News Upsides and downsides of buying off the plan

Upsides and downsides of buying off the plan

Font size :
Nila Sweeney
Buying property off the plan can prove to be a profitable investment, but it's important to be aware of the many pitfalls that can come with purchasing an apartment before it has been built.
 
There are plenty of success stories when it comes to buying off the plan: indeed, people have made bucket loads of money buying real estate before it has been built, by on-selling the property at a profit before even having to settle.
 
The idea behind this kind of investment is that you secure a property today, at tomorrow’s prices, explains Chris Gray, author of The Effortless Empire - Building wealth from property.
 
“As long as you buy at the right price, you might be able to secure a $500,000 property today that will be worth $600,000 when it’s built two years later,” he explains.
 
“Also, rather than having to put all the money down immediately, you just need to put down 5-10%, which can even be a deposit bond of bank guarantee. These are like insurance policies that guarantee you will pay the deposit on completion.”
 
This means that on a $500,000, you may only need a $25,000 deposit to secure your investment, with no further funds payable until the property settles 12-24 months later.
 
As well as this, the property is brand new, so investors will be able to claim significant depreciation deductions at tax time – and of course, there is the stamp duty exemption that shaves thousands of dollars off the overall costs of buying.
 
However, there are no guarantees that the property you purchase will rise in value.
 
A prime example of this is Melbourne Docklands apartments, where oversupply drove down prices between the sale period and final construction. Buyers in this development ended up paying far more for their properties than they were worth, because real estate prices failed to appreciate during the construction period.
 
“Like all properties, off the plan sales can fall as well as rise, so caution needs to be exercised,” Gray says.
 
If you’re thinking of buying a property off the plan property, there are risk mitigation strategies you can use to help you enjoy a profitable investment:
 
  • Buy only from developers with a good reputation.
  • View finished examples of the developers’ previous work, so you can see the quality of workmanship, fixtures and fittings.
  • Ask for evidence of previous results: for example, what was the average sale price of properties in the developer’s last project, and how much are they worth now?
  • Make sure all of the details are specified in the contract, including specific brands, makes and models for appliances.

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Mortgage News and Articles

Borrowers should anticipate a possible rate hike Borrowers should anticipate a possible rate hike

Some experts advise borrowers to look for a fixed loan that allows extra repayments so that they can whittle down the balance sooner Read more

Why choosing the right mortgage is hard for first-home buyers Why choosing the right mortgage is hard for first-home buyers Many feel overwhelmed by the sheer range of products and interest rates on offer, a new survey reveals ... Read more

Mortgage applications drop in second quarter Mortgage applications drop in second quarter This marks the “beginning” of a downward trend, says Equifax executive ... Read more

To break monopoly, many smaller lenders could become banks To break monopoly, many smaller lenders could become banks The proposed change could break the Big Four’s monopoly over the mortgage market and help families get cheaper home loan rates ... Read more

More mortgage news and articles

Sponsored Links

Tuesday, Jul 25, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Whether you're a first homebuyer, looking to refinance, or investing, it's important to have the right loan for your needs. Just fill in a few details below and one of our trusted mortgage advisers will contact you.

A quick & easy way to find the right home loan
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords