Blueprint bliss tips for buying off the plan
Buying off the plan can be rewarding but it has its risks too – just like any investment. Jumping in without proper preparation could turn your property dream into a nightmare.
You can avoid this by thinking about buying off the plan the same way you would think about any investment – with a level head.
To help get you started, we’ve identified the top three features of buying off the plan along with the pros and cons for each. As you’ll see, things are not as black and white as they are often made out to be.
With proper preparation and research you can be well on your way to achieving the income and capital growth you are after.
You get to lock in today’s price
- PROS: By the time the property is completed the market will have risen and you will already be ahead.
- CONS: You may end up paying too much if the market falls, and lenders may be unwilling to loan you the full amount outstanding on your property.
A key feature of buying off the plan is that you secure a price in today’s market even though the property will not be completed until a future date. While there’s no guarantee that the market will rise, you are more likely to benefit from locking in today’s price if you don’t pay too much to begin with and the property development is located in a strong sector of the property market. One way to secure a significant discount is to buy a property in the early stages of development.
If the market does fall, you will need to be prepared for the fact that the property may have a lower valuation at settlement than it did when you first put down your deposit. This shouldn’t be a problem if you purchased the property as part of a long term investment strategy. Holding onto the property for a long time will give it time to appreciate.
That said, you could find yourself in trouble if the bank isn’t prepared to loan you the full amount outstanding on your loan. To avoid finding yourself in this situation be sensible about how much you borrow and save more so you can put down a larger deposit.
You get a long settlement period
- PROS: You have more time to get organised and save money which may reduce the amount of money you’ll need to borrow.
- CONS: A number of things could go wrong during the settlement period including building delays, the developer going bust, the market dropping or interest rates rising.
An off the plan property offers long settlement periods of between one to two years so that the developer has time to complete the property. Putting away as much savings as possible during this time will put you in a much better position come settlement day. But what can you do about the things that can go wrong? Even though they are out of your direct control you can reduce these risks by:
- Buying from a developer with a good track record
- Choosing a property that is located in a prime position
- Making sure you can still afford repayments if interest rates rise.
You get a brand new property
- PROS: You get a newly built property with modern finishes and contemporary design.
- CONS: The completed property may not live up to your expectations or the quality of work may not meet your standards.
Even though it’s hard to get a realistic picture of what the completed property will look like from the blueprint or artist’s impression, there are things you can do to reduce the risk of any unpleasant surprises come settlement day.
Firstly, check out existing properties built by the developer or ask them if they can provide you with the names of any buyers from a past project who can vouch for their building quality.
Secondly, make sure you go through the contract with a fine tooth comb before signing. This is your one and only chance to negotiate the quality and standard of the appliances, fittings and finishes.
Buying off the plan means you get a brand new property with all the benefits of contemporary design and features. Just make sure you do your homework and factor some risk planning into your finances to ensure you come out on top.