What to know when purchasing off-the-plan properties?

Buying into the Australian housing market can be challenge, especially if you live in one of the capital cities. Which is why more and more people are looking for an easier and cost-effective way to get into the market. Purchasing off-the-plan real estate is fast becoming a popular choice due to its affordability and benefits, and is a strategy that works well for many investors. If you have ever seen an attractive image of a property with an even more attractive price, you can bet that it’s probably an off-the-plan purchase.

What is buying off-the-plan real estate?

An off-the-plan property is a legally binding contract with agreed terms, which enables you to purchase a property before the completion of the final development and tenant approval. This means that by purchasing off the plan, you are committing to buying a piece of property that hasn’t been built yet. However, compared to buying a property that is already established and requires many hurdles to get the finance, buying off-the-plan only requires a 10% deposit. Which is why many savvy investors and owner occupiers prefer this property option.

Research everything

Buying off-the-plan can be a very exciting and beneficial journey but one that involves quite a lot of research. As well as researching popular topics within the Australian housing market such as finance, growth, return, gearing and depreciation, make sure you also spend time researching the people involved in the project, such as the builder, developer, architect, broker, accountant and financial advisor. Always perform checks on all professionals you engage with and don’t be afraid to request to see previous work or projects.

Research into the area you intend on buying and make sure you familiarise yourself with the brands (and any alternative brands if these aren’t available that are being used) that will be used in the build.

Know all rules and regulations

Each state has different regulations when it comes to investing in off-the-plan real estate, however it is extremely important that you know all rules and regulations when it comes to this investment. Make sure you are protected by builders’ warranty insurance while the build is occurring. This is protection covers any structural or interior building faults that appear within a timeframe and must be fixed by the builder. It is also a good idea to check the zoning with the local council to see if there are any future developments that will be built in your area which could impact your purchase.

The early bird gets the best property

When it comes to apartments and town house estates, if you get in early when buying off-the-plan, you may be able to customise your property; such as choosing the location, picking out finishes and designing floor plans. Getting in early also gives you a better chance to snap up ones with better value, such as apartments with a view or better designed houses which can help make the purchase worth more by capitalising on rental yields and capital growth. Property Investors love crunching numbers so snapping up a property for less than its value is high on their priority list, and the higher the quality development the more it may go for in the project.

Buying an off-the-plan property can be one of the most suitable options for investors, however remember that the price of your property today is usually based on a future forecast on what it will be worth at settlement rather than what it is worth today, and the final display is never known until the property build is complete. So always make sure you choose wisely, understand your contract, perform thorough research, and get professional advice. By doing this you are making sure the investment runs as smoothly as possible and the numbers work for you.

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