To be clear, the definition of off the plan property is literally that, you are purchasing from a plan. Possibly there will be some samples of the tiles, carpet, kitchen appliances etc, but at the end of the day, you are trusting the developer and builder. As your buying off the plan, there may also be a long waiting period while the property is constructed.
For first home buyers short on cash, this can look attractive as they may have difficulty in finding funds quickly that is required for an existing property with a short-term settlement.
Buying off the plan can give a first home buyer time –
Time to save for settlement,
Time to plan for settlement,
Potentially time for capital growth before settlement, for example, those who purchased off the plan property in Western Sydney before the airport announcement.
Time to make all the relevant applications for the first home owners grant. There may also be benefits with reductions in off the plan property stamp duty.
Buying off the plan does not follow the same process path as a typical purchase of an established property does.
There is more often than not time-critical steps that cannot be neglected.
Below is a list of five tips to buying off the plan as a first-time buyer
1. Get yourself into economic order
Know your financial position, your borrowing capacity and the lending policies of the bank about different property types and locations.
2. Do your research
Don’t buy the first property you set your eyes on. Understand the median apartment prices growth, vacancy rates, rents, employment statistics, and demographics.
Get to know the area, transportation linkages, and current and planned infrastructure projects.
3. Research the development team
Who’s going to deliver this project?
What’s the track record for the builder, developer, architect and sales agent? Go and visit some of the architect and designers recent projects.
4. Get proper independent legal advice
Before signing anything ensure that you have spoken with a specialist property lawyer before signing anything.
5. Understand the time frames
Ensure that you are fully abreast of all pending time frames around the delivery of the project and the sunset dates in the contract of sale.
Following the above steps will assist you in ensuring the best possible outcome at the settlement of your purchase.
With all best-laid plans there are also risks that need to be mitigated:
- The project may not proceed
- The finished product may differ to what you anticipated which can cause problems with off the plan property valuation
- Expected capital growth doesn’t eventuate, or value may be less than purchase price
- You can’t physically walk through the property you are buying (this last one is something that I struggled with when I first bought off the plan)
For help & guidance through any of the above steps, please feel free to contact an Awesome Lending Solutions broker.
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